Why Amazon’s Change is Important

Updated [7/3]:¬†Angel Djambazov had an excellent writeup at GeekWire titled “A Guide to Why Amazon is Losing the Tax Battle” that I had to include in this post. Go check it out, it’s well worth the read.

It’s been a busy day or two for affiliate marketers… I caught this tweet earlier, and wanted to add my commentary.

Danny SullivanDanny Sullivan – @dannysullivan
106 comments later, people really have a lot of opinions on the Amazon Affiliates closing in California, it seems. Whew http://bit.ly/jBZxOX

Danny’s argument is that Amazon is in the wrong here – by not giving enough fair warning to affiliates, and then by not just owning up to the issue by just paying the taxes. Though I agree with him that the warning provided by Jeff Bezos was virtually instant and therefore not very helpful, I disagree with him wholeheartedly on the “just pay the taxes” argument.

Furthermore, I think my real issue with Amazon’s termination of their program lies in the fact that they could have changed their existing referral model to a CPM or CPC program virtually instantly, thereby providing CA-based affiliates at least some value in retaining their referral links (until they moved their physical location). Seems to me that the issue here was based on commission-based sales referrals. But would the law still affect people who were reclassified and compensated as marketing partners?

ReveNewsReveNews – @Revenews
New Post: Commission Junction Responds To California’s New Nexus Law http://t.co/2HcL2UU

Though there’s not a whole lot of detail, Commission Junction (a massive player in the affiliate marketing industry) obviously sides with Amazon’s argument. There’s a strong sentiment that this isn’t a “net-zero” activity – ie: a loss of income-tax revenue is offset by the increase in tax collection. Instead, it appears that the expectation on the part of affiliate managers and merchants is that this will lead to a vacuum of revenue – fewer sales, fewer commissions, and fewer programs willing to undertake the task of coordinating 50-states worth of tax law headaches.

And that, by the way, is the crux of Amazon’s argument. A business such as theirs should be governed by the state(s) they directly operate in, as well as the federal government as the group charged with the responsibility of interstate commerce. If Amazon left their program open, they’d set precedent that they really don’t want to make.