More and more Amazon affiliates are getting the beat down as Amazon attempts to dodge paying taxes on sales it’s affiliates drive to the site. So far I’ve found that Rhode Island, New York, North Carolina and Hawaii affiliates are all getting “the letter” indicating that they’re being dropped, or at the very least suspended, as affiliates. Based on the huge amount of revenue cash starved states are missing out on by not collecting sales tax on affiliate sales, I’m guessing we’re going to see a rash of states follow suit. Rhode Island alone estimates it’s losing $3 million in sales taxes for online sales.
If Amazon represents a major portion of your business model, a letter along those lines could really put a crimp in your revenue stream. Here are 3 things you could consider doing if you need to punt and change:
1. Change Affiliate Income Focus
This is an obvious one, but probably the one with the least amount of pain from a business standpoint, but the most amount of pain time-wise. With the millions of products in other affiliate networks like Clickbank, you have a lot of options to choose from. It will take some retooling, but going with digital products like those in Clickbank can help you avoid the sales tax issue for at least a while.
2. Change Affiliate Income Sources
Another option that is time intensive, but doesn’t impact your business structure as much is to change review sites and references to specific products to eBay links. This could allow you to drive traffic to specific products, still earn a commission, and hopefully avoid being dropped as an affiliate for being in an online sales tax hungry state. Of course the big question is how long before sites like eBay have to follow suit.
3. Move Your Business To Another State
I’ve read a number of posts suggesting incorporating your business in Delaware (this one seems to be the most popular suggestion) or Nevada where the business climate is friendlier. Both of these states have long been considered THE place to incorporate any new business providing some advantages over incorporating in your home state. I honestly don’t have much experience or knowledge about how the process works, so it’s something you would want to research. If you decide to go this route, there are a lot of companies that can help you do it quickly, easily and pretty inexpensively.
Overall, this latest trend should encourage all of us give more consideration to the types of sites we set up, and especially how we monetize those sites. Oftentimes I think Internet Marketers, Affiliates, etc. just throw up sites that seem good at the moment without much thought to a longer term plan or potential consequences. I know I’ve been guilty of that (and still am at times).
This is a great time to evaluate your current project launch plans and consider potential implications such as online sales tax laws. They could make or break your earnings potential!