Yesterday Rich Owings tweeted a sad news, that of the affiliate tax (aka “Amazon tax”) passing the House and Senate in North Carolina:

Less than half an hour ago, Melanie Seery tweeted (highlighting mine):

Today in her blog she also wrote:

It is expected that North Carolina, like Rhode Island, will also have a strict interpretation of the nexus definition. North Carolina can expect terminations from more merchants as word of  new nexus definition spreads.

As reported earlier, Amazon [see this post] and Overstock [see this announcement] have already pulled out of North Carolina.

Sad news overall. Especially after everything that has been done by multiple affiliate marketers to fight it.

Details on what appears to be an upcoming legislation in Melanie’s North Carolina Internet Sales Tax Moments Away blog post.

Yesterday evening @MattEnders, a North Carolina based colleague of mine, tweeted:

Having been one of the people to blog about the problem a week ago, I have gone online this moring to try to find the interview. Couldn’t find the recording itself, but got to this page on MSNBC.com:

The page links this this article on MyNC.com. where Enders’ anti-tax points are juxtaposed to those of Senator Hoyle, co-chair of the Senate Finance Committee and proponent of the North Carolina affiliate tax. The article says that the “sales tax from Amazon.com alone could run as much as $13 million a year”. It could but will it? The answer is negative. So Amazon will pull out. What about Overstock.com that the article also mentions? Based on the New York precedent, the answer is also negative.

The article ends with this paragraph:

Senator Hoyle said while he sympathizes with small business owners, he believes on-line retailers aren’t willing to give up the revenue, even if it means paying tax.

Recalling the New York State experience, hundreds of online retailers will “give up  the revenue”, and in addition to Amazon and Overstock we’re also talking such major brands from the Internet Retailer’s Top 500 List as CaféPress.com, CSN Stores, Gaiam, Home Shopping Network, Jewelry Television, Karmaloop, Lamps Plus, Musician’s Friend, NetShops, Northern Tool + Equipment Co., OnlineShoes.com, Oriental Trading, ReStockIt.com, ShopNBC.com, ShoppersChoice.com; and this is only to mention the larger brands. See this thread for a fuller list of merchants that dropped affiliates after a similar law passed in the state of New York.

As someone has commented under the above-quoted article “7% of zero” is “still zero” and “that’s what NC will get in taxes”. I believe, the actual number is 4.5%, but that doesn’t change the main point of this statement. Such a law will not yield the desired results, but what it will definitely do is destroy thousands of smaller businesses along the way.

This morning the following e-mail has landed in mailboxes of all North Carolina affiliates of Amazon:

We regret to inform you that the North Carolina state legislature (the General Assembly) appears ready to enact an unconstitutional tax collection scheme that would leave Amazon.com little choice but to end its relationships with North Carolina-based Associates. You are receiving this e-mail because our records indicate that you are an Amazon Associate and resident of North Carolina.

Please note that this is not an immediate termination notice and you are still a valued participant in the Associates Program. All referral fees earned on qualified traffic will continue to be paid as planned.

But because the new law is drafted to go into effect once enacted – which could happen in the next two weeks – we will have to terminate the participation of all North Carolina residents in the Amazon Associates program on or before that same day. After the termination day, we will no longer pay any referral fees for customers referred to Amazon.com or Endless.com nor will we accept new applications for the Associates program from North Carolina residents.

The unfortunate consequences of this legislation on North Carolina residents like you were explained in detail to key senators and representatives in Raleigh, including the leadership of the Senate, House, and both chambers’ finance committees. Other states, including Maryland, Minnesota, and Tennessee, considered nearly identical schemes, but rejected these proposals largely because of the adverse impact on their states’ residents.

The North Carolina General Assembly’s website is http://www.ncleg.net/, and additional information may be obtained from the Performance Marketing Alliance at http://www.performancemarketingalliance.com/.

We thank you for being part of the Amazon Associates program, and we will apprise you of the General Assembly’s action on this matter.

Sincerely,

Amazon.com

It seems that North Carolina is about to enact the “unconstitutional tax collection scheme” similar to the one that became a law in state of New York last year.

A Greensboro, NC based news website writes that this “tax change is part of a package passed by the House last week in its attempt to rewrite the budget” by lawmakers who are “struggling to fill what they say is a $4.5 billion gap between the money needed to keep government operating as it is and the revenue the state is due to take in next year.” The General Assembly’s estimate is that this will help the sate raise $13.2 million next year. I wonder if they expected major players to start pulling out of the game. They should have if they have followed the Amazon’s reaction to this in other states.

If you are reading this, and you are a North Carolina based affiliate, it is not too late to contact your state representative to fight this bill! Chances are the lawmakers have no clue that what they are doing is actually going to put great numbers of NC residents out of business, the affiliate marketing business.