Amazon to Re-Embrace California – A New Chance for Affiliate Marketers?

Amazon to Re-Embrace California – A New Chance for Affiliate Marketers?

By Ralf Skirr.

Today's news is hopefully good news for affiliate marketers, especially those promoting

After a long and heated dispute regarding the sales tax, Amazon and the State of California seem to be coming to a treaty. This treaty, if implemented, is conceived to be a win-win solution that will benefit both Amazon and YOU, if you are a resident of or one of this Amazon’s affiliates in California.

Sales Tax Controversy

Before we go and find out what agreement Amazon and California is coming down with, let’s first take a look at what they have been through to reach the agreement…

The sales tax controversy started in 2010, when California lawmakers began to eye giant retailers who don’t have physical stores in their state but are earning millions, or even billions, of dollars each year. While online dealers such as Amazon are protected by the 1992 Supreme Court ruling that says businesses are not obliged to pay sales taxes if they don’t have a physical store, headquarters, or warehouse of any kind within the state, lawmakers saw a loophole in it, especially when they found the possibility of raking in $150 million from the company annually.

The idea was that, although Amazon (and other online shops) might not have a physical presence in a state, they might have affiliates in the state. Thus those affiliates would be recognized as physical presence and sales tax could be collected.

With a hundred million on the line, the government made a strong stance to get the tax due. Amazon, however, does not agree and chose to immediately cut ties with its California-based affiliates last June. There were no notifications made beforehand; affiliates just found themselves abandoned by the company.

To make up for this, Amazon made a proposal. The proposal basically states that if the California government holds on the implementation of the tax collection until next year, Amazon will not only be paying taxes but will also have distribution centers constructed in the state and will employ more than 1000 workers in the process. While the government claims that it will never agree to such a deal, an information leak reveals that the said treaty is already well underway.

Amazon-California Treaty

Just to further emphasize, the agreement that Amazon and California is supposedly working on includes the following provisions:

  • The government will not collect sales taxes from Amazon until September 2012
  • Amazon will forego a part of its revenue, amounting to $200 million
  • Amazon will re-open its line of communication and transaction with its California-based affiliates

One thing worth noting, however, is that the bill that will make all these possible is still being processed, waiting for the signature of Gov. Jerry Brown. Until it is signed, none of the above conditions can or will be fulfilled.

National Intervention

One question is continuously bugging critics and followers of the Amazon-California dispute. That is: Why does Amazon seems so giving when it comes to foregoing part of its coveted advantage (selling without paying tax)?

The answer probably lies in the fact that the federal government may take on this case if it becomes a strong national concern. If the federal government does take on this case, a nationwide employment or consolidation of sales taxes will probably be implemented, taking precedent over the California bill and relieving Amazon of its obligation to pay separate taxes—certainly the end result Amazon is betting on.

Right now, it is still unknown whether Amazon will end up paying separate taxes or if it will benefit from sales tax consolidation. Nevertheless, regardless of the result, California affiliates, as well affiliates from states Amazon formerly cut ties with, will probably get another chance at making money through this commercial giant.



Category: Affiliate Marketing | Tags: ,

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