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Affiliates in the United States increasingly find themselves at the center of a battle pitting bankrupt state governments against major online retailers. The battle revolves around the thorny issue of state sales tax, and when online retailers are required to collect them.

Recently, affiliate marketers in Colorado were able to get language involving affiliates removed from a tax bill. Had the language not been removed, online retailers with Colorado affiliates would have been on the hook for collecting Colorado sales tax.

At the time, the removal of language that would have certainly put a crimp on affiliate marketers in Colorado seemed like a victory for the Colorado affiliates who fought tooth and nail to save their businesses. But 'seemed' is the operative word. The world's largest online retailer, Amazon, has decided to terminate its relationship with Colorado affiliates anyway. A letter Amazon sent to them yesterday explains:

We are writing from the Amazon Associates Program to inform you that the Colorado government recently enacted a law to impose sales tax regulations on online retailers. The regulations are burdensome and no other state has similar rules. The new regulations do not require online retailers to collect sales tax. Instead, they are clearly intended to increase the compliance burden to a point where online retailers will be induced to "voluntarily" collect Colorado sales tax -- a course we won't take.

We and many others strongly opposed this legislation, known as HB 10-1193, but it was enacted anyway. Regrettably, as a result of the new law, we have decided to stop advertising through Associates based in Colorado. We plan to continue to sell to Colorado residents, however, and will advertise through other channels, including through Associates based in other states.

Amazon's letter goes on to encourage Colorado affiliates to "express [their] views of Colorado's new law to members of the General Assembly and to Governor Ritter".

Amazon's frustrations are certainly justified. Politicians facing huge budget shortfalls are desperate for tax revenue, and they're going to ever-extreme measures to find new sources of it. Major online retailers like Amazon, who have legitimate reason to be weary of online sales tax legislation that will be unfairly burdensome and costly to adhere to, should fight the good fight. This legislation will only hurt consumers (compliance costs will inevitably be passed along to them), and as some have noted, much of this legislation may be unconstitutional.

Yet by terminating Colorado affiliates, Amazon is using affiliates as political pawns. Thanks to their aggressive lobbying efforts, affiliate marketers in Colorado were able to get language involving affiliates removed from Colorado's misguided tax legislation. That's not enough, however, for Amazon, which is sacrificing them to make a larger point about the rest of the legislation. But Amazon's legitimate beef with the rest of the legislation isn't a good excuse to cut the throats of its Colorado affiliates, especially since Amazon certainly knows how hard they fought to defend their businesses. No ifs, ands or buts about it: Amazon is sending the message it doesn't really care any more about its affiliates than politicians do.

While ditching Colorado affiliates probably won't hurt Amazon's bottom line, if Amazon's affiliates are so expendable, perhaps it's time Amazon considers ending its affiliate program altogether.

Photo credit: jacreative via Flickr.

Patricio Robles

Published 9 March, 2010 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (1)

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peter brostrom

According to Patrick O'Keefe, an affiliate based in North Carolina, running links through UK based Skimlinks is a way around this. Not sure it is legal. See O'Keefe's Twitter stream for discussion with Colorado based affiliates on loop holes.

http://twitter.com/iFroggy

over 6 years ago

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