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.