It’s official: Texas governor Perry just vetoed the ridiculous etax (which 99% of the time results in Amazon and other online merchants firing the affiliates in the state, meaning that the state doesn’t grab MORE income, but loses income as their own citizens lose a source of income)…but California legislators approved it. Now it goes to the senate in California – but there’s still hope, governor Jerry Brown could veto it still…
And I, for one, won’t hold my breath for that. Snow has a better chance in a volcanic eruption than this bill has of not getting passed in Cali-all-for-taxes-ornia. Why does it matter?
Well, it’s something to think about for my Cali readers. It takes some time for Amazon to counter-sue and go through all the legal proceedings – all the while the writing’s on the wall.
If I lived in California, I’d immediately look into some way of getting my business on solid ground. Meaning:
Solutions for Affiliates Under the Etax
1) Use web 2.0 sites like Squidoo to make affiliate sales…
2) Incorporate in Wyoming, Nevada or Delaware (or Oregon or some state where they don’t collect state sales tax, there’s only 5 to choose from, Wyoming being the reigning champ for incorporating in). This requires some cost, but depending on your business success online – it might be worth looking into.
3) Using affiliates like Sears or Wal-Mart, Barnes & Noble or the like – those who collect state sales tax on online purchases already, usually those with a physical presence in the state in the form of brick and mortar stores. I don’t affiliate with them since they’re all behind this etax, and also because their terms all SUCK ROTTEN EGGS.
4) Find another source of income – like AdSense, Chitika or a CPA program…or selling to your own list.
5) Focus on digital downloads – these are exempt from legislators’ attempts to tax everything. Digital downloads are entirely exempt from taxes (with maybe a few exceptions I don’t know about, but I’m pretty sure they are protected under Federal law at this point).
It also matters to me because I want to move back there, and this leaves me in a lurch of sorts (to add to my present lurches, bwahahaha) – my plan is simply to go with a Wyoming-based corporation with a virtual office. The thing is I don’t know how much that costs, so right now it’s all theory.
Here’s the original story:
Texas governor vetoes the etax bill (thus the affiliates in the Lonestar state are still safe, thankfully).
California doing what Cali does: tax people and businesses to death (while thinking this will answer a deficit which is ludicrous – it’s just going to drive more and more businesses away, including ripping the income out of the hands of its own citizens that do affiliate marketing in the state: epic fail, Cali, epic fail).
Here’s where I’m coming from: California and other states currently stink at balancing their state budget. It’s not an income problem – it’s a spending problem. They aren’t “losing” money from Amazon et al not being taxed – they never had that money. So any argument that this is a source of lost revenue totally ignores all the pork spending going on…
And yeah. This isn’t a political blog, so I’ll leave it at that – I just want to warn you guys in Cali that you’ll need to think about how this affects your business in the near future (i.e. be ready to get the email from Amazon, Commission Junction, Hayneedle and whoever you affiliate with that you are no longer an affiliate because of the decision of the state legislators…stay tuned, since it could theoretically get vetoed…just don’t hold your breath).
Alright. Back to the trenches for me. If you’re wondering how my rankings are going for the site that just tanked, don’t worry – it’s just one site. I make money with others – but that one’s gone for now, no improvement – nothing good to report other than I’ve learned a bit about making better choices. I think.
Stripes are hard to change, you know. ;)
Thanks for reading. Hopefully I can get back on and have some good news to report on making money online, etax or no.
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I am sure glad you are keeping up on this stuff because I sure the heck had not. lol
Sara recently posted..May 2011 Update
Yeah, you came to mind, but Cali has TONS of affiliates that ought to be thinking about what to do about it. I think a lot of the affiliates in Google’s network are brick-and-mortars, so that’s food for thought. They seem to be exempt from the hullabaloo. However you spell it.
:) AdSense is also safe (yet another reason to consider it I guess)…but digital downloads are the good stuff, apparently.
Thanks for the heads up James – I always considered Wyoming a horrible place (based on no evidence or experience), but now Im kindof liking it.
As for your tanked champion site… are you still confident it was because someone copied and duplicated your site and then reported it? or text link ads?
John recently posted..Nation of Wimps – A Review
Hi, John – well, I’m a marketer and writer first, an SEO just out of need and because I enjoy the benefits of SEO – but technically I’m not sure. I’ve been told by some big names in our trade that the reason it’s tanked is due to the Panda update, which leads me to conclude it has to do with the dupe content (since I’ve read a lot of scrapers having had success due to Panda by accident). Whether some lout actually reported me to Google or Google just found the dupe content and for whatever reason punished me is something I’ll never know…
But the other fact is that yeah: I used a link building service (I’ve written a drip fed post about the service you might want to read)…and found out later that they didn’t have a ton of link diversity. So which was it? Not sure: the timing of everything coincides with another Panda tweak / my link building / finding a lot of copycats out there…anyone’s guess.
Just another reason of many to not move to California!
Carrie recently posted..May Earnings Report
Yeah, except when it’s home…ugh! We’ve made a preliminary plan to move back, but yes: a lot of reasons not to move back there. Cost of living and a hostile business environment…hmm…
…and all the liberals :(
Carrie recently posted..May Earnings Report
True, but I have a lot of liberal family members and friends. So it doesn’t bother me any more like it did once upon a blue moon (actually I’m a bit apathetic politically, too many debates and too many friends to cherish).
That might not be a good thing (being apathetic until something happens), I dunno at what point it dawned on me that I don’t want to debate any more, but then something like this happens and I get my knickers in a knot again. :/ So much for being all Swiss Army about it.
I really like living in CA. Hope someone informs the governor that this is misguided. It ALWAYS results in lost revenue, not gain. It is also ALWAYS supported by Amazon competitors on very weak legal grounds. It should be incumbent upon the user to report and pay their own use tax when purchasing from Amazon. But I guess it is easier to pursue a corporation that hundreds of thousands of citizens who don’t pay taxes.
Boo.
Hi, Kerry – not sure what’s going to happen, but I’d bet that governor Brown’s happy with the possibility of “more tax revenue” (which will not materialize, it just never does when states go this route). It looks good on paper for the voters who share the opinion of the lobbyists pushing this agenda, but the fact is that affiliates need to protect their income somehow, and hopefully some of my ideas (which I found primarily in Warrior Forum threads) will pan out for you all.
Thanks for the Texas update. I live in Texas and I hadn’t hear this yet (shows how much I keep up with the news doesn’t it.)
I read a thread about the California tax on the WF the other day, and someone else mentioned Oregon.
Sales tax isn’t the only consideration and, honestly, being from Oregon, it has long been known as a tax hell for both residents and businesses.
They lightened up a little bit when the timber and logging industry took such a big hit, the economy was in the dumps, and they had no other industry to fuel it. It’s still not great though.
If you are making any sort of money at affiliate marketing, you have to look long term. I think I would incorporate in Delaware and consider a corporation registered agent as just one of my necessary business expenses.
Also, as your business grows, it would probably be a good idea to segregate it out into multiple LLC’s and I was reading the other day that Delaware was the state to originate the “serial” llc concept.
>>Focus on digital downloads<<
I'm really not sure that this is the case. Are you sure?
Carla recently posted..SEO Link Robot Discount – Last Chance!
Yeah, digital downloads are virtual and there’s a clause that exempts them (in most, if not all states) from online sales tax. I found it at http://www.stopetaxes.com/ – but read it elsewhere and can’t remember where at the moment.
The only place I deal with those downloads is here, really – but antivirus programs, reg cleaners, software of all sorts…web hosting and the like all come to mind. There might be some exception to the rule, but seems the safe ground at the moment.
(BTW, if I tried, I couldn’t sound drier than a desert. It must be dinner time.)
but antivirus programs, reg cleaners, software of all sorts…web hosting and the like all come to mind.
They aren’t excluded in Texas then . . . or else the Comptroller’s office lied to me.
When I first started my business, I went into the local office for the Comptroller, told them exactly what I was going to be doing, and was told I had to collect sales tax on pretty much everything except for consulting.
I have to collect it on hosting, design work, although I don’t on maintenance as it is just modifying what is already there.
I’m doing more direct ad sales now, and I don’t have to collect on that. But it’s kind of screwy what I have to collect on and what I don’t.
Carla recently posted..EzineArticles Loses Its Mind Post Panda
Hm – it might be because it’s part of a service you provide, whereas a straight download (like a review site) is (from what I’ve read) exempt. That may be the difference – just a hunch. I’ll do some more digging on the matter and post what I find (or maybe just avoid giving tax advice – hmmm…that’s an idea).
Carla – I just read that 18 states charge taxes on these things. Living in Idaho I’m not on that unhappy list. :X
Just sayin.
James with Squidoo you have to provide your Amazon affiliate code so I’m not sure that gets around the situation where Amazon kicks their affiliates to the curb like in Illinois. Your affiliate payout would point to (in my case) and Illinois bank. But maybe there’s a loophole I don’t know about.
There are 2 companies that have signed up for lot of the affiliate programs. You sign up with them. Then when you write a post about “the best charcoal grill ever on Amazon” they provide appropriate Amazon links. If anyone clicks on your link the sale goes to these companies. They then take a cut but give you the majority. I don’t think there’s a problem being in no tax states like Illinois and maybe California. Bad news is I can’t remember the name of either of the companies. If you go to WF and search for Illinois Amazon tax or Amazon ta you might find it.
The digital download exclusion is interesting. I’ll look into that more.
I think incorporating in a no-tax state is the way to go. In fact it would be a great niche for someone to start business and provide you with everything you need (incorporation, bank account, mailing address etc etc ) for a reasonable fee.
Thanks James!
Sandy
Ooops 1 more thing. After your post about site sabotage I did get an email from guy selling software to copy WP sites intact. He said it copied “everything” which I took to mean links but maybe he meant something else. If Google doesn’t do anything bout this type of theft I’m hoping Word Press comes up with a way to protect sites.
Sandy
This isn’t good news for Amazon affiliates in California, I remember all the frustration of people in Illinois who were recently cut by Amazon due to their eTax bill.
Justin Germino recently posted..E3 2011: Microsoft ‘redefines’ your entertainment experience
Yeah, now there’s a senator who’s driving it all the way to the Federal level, so it may soon be country-wide, we’ll have to see how this plays out. I still can’t fathom how they circumvent the Supreme Court ruling over it on the state level, it’s ridiculous, I can think of a ton of Supreme Court rulings I wish states could circumvent but there’s no way around them…this apparently seems to be an exception to the rule.
And now there’s a class action lawsuit afoot in Illinois from Amazon and the affiliates there (not sure if they’re all on board or not, it’s still preliminary)…hopefully that heats up and succeeds in calling this whole affair anti-Constitutional (which it is, or it’s at the very least breaking the Supreme Court’s ruling – not sure if that’s defined the same way). I hate talking politics but this is just not looking good for affiliate marketing, so it’s hitting a nerve.
If it is at the federal level, I think Amazon will have no choice but to charge sales tax on behalf of the affiliates and write it into their program. (At least I would hope). Either way thanks for keeping us informed and let’s hope people actually come out of the woodwork and remember that OUR VOTES control who is elected. Write to your local congress and state governor’s office, if enough people raise a storm they would rather drop a bill than risk losing a re-election!
Heck, some big time bloggers should create a form based website, where a user can fill out a form signing it and then it prints and mails a copy to the local elected officials!
Anyway, I don’t like talking politics either talk to you later.
Justin Germino recently posted..3 Billion Daily Views: YouTube as an Important Marketing Tool
And you’re absolutely right – Jerry Brown signed the bill, and California Amazon affiliates are out of luck. Found your post while looking for an alternative – as you say, Barnes & Noble and others are a LOUSY replacement for Amazon. May just have to establish residency in another state.
That said – you mentioned incorporating in WI. Have you looked into that? Not sure it’s a viable way around the Amazon thing.
Rich recently posted..Amazon.com to Terminate Their California Affiliate Program
That’s horrible news, Rich. There are a few answers to the problem, I mention in another post using other Web 2.0 properties to host your reviews for Amazon, getting them to rank, etc. Squidoo, Hubpages, Blogger and a host of others.
Or use Skimlinks.com or Viglinks (I think it’s Vigilinks?) is another – I believe Google just bought Vigilinks not too long ago, but that’s besides the point. Both Skimlinks and Vigilinks are going to take a cut but allow you to use their links and still get some money.
Another option, like you mention, is incorporating – and yes, Wyoming is the big contender and the way I’ll be going. You’ll need a virtual office and a lawyer to set it up, but worth it in the long run depending on your online presence.
There’s more than a few threads in the Warrior Forum that can point you in that direction, a lot of speculation, too – but incorporating out of state is common practice. An LLC should do the trick. I’d look in the search bar at Warrior Forum under “Amazon Tax Loophole” or something.
Hope that helps! My father-in-law just asked me about this today, so it must be making the rounds there back home. You may be able to do this with Legalzoom or a similar service to file online – but I’d still talk to a lawyer since I’m fairly sure you need at least a virtual office of some sort, those places run the gambit as far as price range goes and services provided.