Yesterday (July 24) in his Sacramento Bee column Bruce Maiman provided his viewpoint of the whole “Amazon tax” situation. Among other things in his article he made a statement of affiliate marketing which I simply cannot miss.
…Another claim: The law punishes thousands of California small businesses affiliated with Amazon.
To explain: Affiliate marketing is basically the Internet equivalent of a referral. When you click an Amazon link on, say, Mary’sQuilts.com, Mary gets a cut of the proceeds from whatever you buy on Amazon. In reaction to the new law, Amazon cut its ties with California affiliates. Result: No more referral fees for California online businesses. They lose money, go out of business, maybe leave the state. “Job killer!” cry Internet tax opponents.
Wait: I’m supposed to be sympathetic to businesses that were taking advantage of a loophole that never should’ve existed in the first place? It’s like a gas pump accidentally set at $1 a gallon and motorists lining up to advantage themselves of an existing flaw. You don’t complain when that gets corrected; same thing here.
I disagree. Equating affiliate marketing to “businesses” that are
or where “taking advantage of a loophole that never should’ve existed” is both shortsighted and inaccurate.
You are right in your basic definition of affiliate marketing as referral marketing.
You’re also probably right that with Amazon’s actual physical presence in California affiliate terminations aren’t gonna help (I’m not a tax lawyer, so I won’t claim I know for sure). In fact, I too have a big problem with Amazon using affiliates as cannon fodder in this “fight.” As Danny Sullivan wrote in his recent open letter to Jeff Bezos:
You could collect the tax, voluntarily. You could keep your affiliates, give back to the state, be more competitive with those retailers here and not cause all this ill-will that’s more about enriching your company than fighting the good fight.
However, Mr. Maiman, please don’t make affiliate marketers look as some kind of unclean business(men)/(women) dependent on the paradigm “glitch” and imperfections of legislation. Affiliate marketing is not based on “taking advantage of a loophole”. It’s not dependent on the existence or the absence of this sales tax. The problem is that state-specific taxes like these end up targeting specifically affiliates (and not any other types of online advertising that contributes to the final sale), and yes, when, instead of collecting the tax, merchants decide to terminate the relationship with affiliates, both affiliates and the state lose — the former get an income hit, while the latter collect less in income taxes.
As always, this blog post is open to comments and expressions of your opinion(s).