If you're an affiliate in the United States, there's a good chance you're not sleeping very well these days.

States continue to wage war against major online retailers, leaving some affiliates cut off from the affiliate programs that they depend on for income. And new battles look set to break out in some of the largest, most important states.

Already this year, Illinois, which was home to large affiliates like FatWallet, enacted legislation that resulted in major online retailers, including Amazon and Overstock, saying goodbye to their Illinois affiliates.

FatWallet has since announced that it's relocating to nearby Wisconsin, meaning that Illinois will not only be losing out on sales/use tax it wasn't collecting, it will be losing out on FatWallet's corporate income tax, the state income taxes paid by its employees, local sales taxes paid by employees when they go shopping, etc.

That companies like FatWallet are relocating to escape ill-conceived tax laws is hardly surprising. If they don't and they can't participate in some of the largest affiliate programs, they may be forced out of business.

But there is a problem: as highlighted visually by Commission Junction's affiliate tax map, it's getting harder and harder for affiliates in the United States to relocate.

More and more states, finding themselves in desperate financial straits, are looking for 'revenue', and affiliate taxes seem have become a popular option despite the fact that they simply don't work.

Right now, it appears affiliate-killing tax legislation could conceivably pop up anywhere. That means fewer and fewer companies reliant on affiliate revenue will be able to simply hop over to a friendly neighboring state without an affiliate tax and rest easy.

If California goes the way of Illinois, look out. After all, California isn't just a large, populous state; it's home to the tech capital of the world. Many of the world's most prominent internet companies were started in there, and many of the most promising startups continue to be born in the state.

If you can't be an affiliate in California, one has to consider whether affiliate marketing really has a future in the United States.

At some point, it's possible that online retailers will look to ditch their U.S. affiliate programs altogether. Money spent on affiliate marketing can easily be funneled elsewhere, perhaps even producing greater results.

Overstock, for instance, is giving the money it's no longer paying to affiliates in affiliate tax states directly to customers in those states through its customer loyalty scheme.

We shouldn't be surprised to see other retailers eventually experiment with similar techniques, leaving affiliates to wonder where they fit in long-term. Unfortunately, it appears that U.S. affiliates may be little more than pawns in a war they can't win.

Patricio Robles

Published 7 April, 2011 by Patricio Robles

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

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Peter Bordes

Peter Bordes, Executive Chairman & Founder at oneQube

Patrico thank you for covering this very important and growing issue. one key thing to add to this post is that the affiliate marketing industries Performance Marketing Association PMA is fighting this battle full force. http://www.performancemarketingassociation.com

The PMA is at the heart of the battle. there is a tremendous amount of data and information on the site and blog about how everyone can join in to help. the PMA is the centralized voice of the industry and its critical that everyone get behind them. affiliate marketing is highly fragmented and the best way to make a difference is thru a single united group.

EVERYONE NEEDS TO GET INVOLVED and can make a difference! it will run thru every state and its critical that it gets forced up from the State level to the federal.

about 7 years ago

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Jeannine Crooks

This is indeed a serious situation for US affiliates, but not one without hope.

I helped to fight the tax in Colorado, spending a great deal of time at the State Capital speaking with individual representatives and senators, and testifying before the Finance Committees of both chambers. Through education and a great deal of attention to this issue created by literally thousands of emails sent by affiliates throughout our state, we were able to affect the changes we needed to protect our industry.

As Peter said, getting involved does make a difference. Every voice counts. Together, we can stop this juggernaut!

about 7 years ago

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Jan Petrovic, proimpact7.com

If you are an affiliate in the USA who is facing being cut off by online retailers there is a solution. I am based in the UK, and if you are interested I could help you out by acting on your behalf, i.e. receiving your commission under my name and UK address and the passing it back to you. If you are interested call my UK mobile 0044 786 167 9819.

PS: I am an affiliate by myself using affiliate networks and receive many cheques monthly in US dollars as well, so I understand the whole procedure how to handle these issues.
You are also welcome to come over to UK for a visit to discuss this matter personally.

Regards

Jan

about 7 years ago

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Jonathan (Trust)

"At some point, it's possible that online retailers will look to ditch their U.S. affiliate programs altogether."

No, it's not. The reality is there will always be merchants out there looking for more traffic and sales. And affiliate marketing is the best channel out there (if you run it right) because you only pay for performance. And there are many brick and mortars out there with a physical presence in many states. Good affiliates adapt.

about 7 years ago

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winston dennis

again thanks winston dennis

about 7 years ago

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Orbro

Well, I don't think there is something wrong to paying taxes. "give
To ceasar what is for ceasar". Although many affiliates would disagree
There is really nothing wrong about paying tax, just put it like helping
the community.

about 7 years ago

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Steve

There's is nothing wrong with paying tax. The problem arises when the tax collection scheme is so complex that the cost of compliance is higher than the business benefit derived from the sales and new customers generated by the affiliate marketing program.

That is the problems that has caused many companies to simply terminate their affiliate marketing programs in certain states. SO now, instead of the revenue they once received from affiliates in the form of income, sales and B&O taxes, they no receive none, and the affiliate is looking for other work.

It's a double whammy. The state gets no benefit, and they add to their welfare and unemployment rolls. Nice work, pols!

about 7 years ago

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Lette Rhead

I believe it's just a matter of time before the entire United States will have a 'uniformed' taxing system for Internet transactions. The Internet is still in it's infancy, and a lot needs to be worked out.

Naturally, with a growing national deficit and most individual states struggling to make budget, new ways to add revenue for the government will be investigated. An 'Internet Tax' is obviously a very lucrative proposition. Only time will tell.

almost 7 years ago

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Mario

Come live in Australia. We have uniform federal tax system that while being high is very fair. I still pull commissions from the US and UK. You can operate an affiliate website from anywhere. Find a tax free haven.

almost 7 years ago

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