Affiliates in Nexus Tax States, Reverse Geo-Target In-State Traffic

A recent BrandVerity’s Tweet sparked an intersting discussion. In case you’ve missed it, here it is:

Since some may require definition of several key terms used above, here’s all you need to know here:

Affiliate nexus tax — state-specific sales tax imposed on sales by in-state affiliate marketers to in-state customers [more here].

Geo-targeting — “ability to target a marketing or advertising campaign at a limited set of visitors based on their physical location” [more here].

Reverse geo-targeting — intentional exclusion of certain geographic areas, so that ads are not being displayed there.

BrandVerity‘s idea is both simple and ingenious. Case in point: reviewing one of the programs that we manage, I couldn’t help but notice an affiliate who was once generating five-digit sales numbers, but in 2012 sent five-digit number of clicks, but only $334 in sales volume. I emailed them to find out what has changed between 2011 and 2012, and received one eloquent answer:

Regarding performance: we were expired last year due to nexus for several months out of the year, in case you were not aware.

I wasn’t, but this clarified things immediately. So, a high producer was terminated from the program based on their geographic location (California, in this case) — so that the merchant doesn’t have to collect sales tax in this state (for the record, all California-based affiliates have been consistently producing six-digit annual sales numbers for this merchant for years).

So, the merchant didn’t want to collaborate much here. But can an individual affiliate do something? Absolutely! Start reverse geo-targeting, like BrandVerity is suggesting, thereby (a) stopping showing this merchant’s ads/links to customers residing in your state, and, as a result (b) relieving the (uncollaborative) merchant from the necessity to collect that sales tax in your state. Then you can (c) reach out to the merchant, demonstrating to them how the solution works, and requesting reinstatement of relationships.

Note: the above-quoted (large) affiliate did not have anything like this in place (yet). Hence, the idea to re-emphasize the solution in a dedicated blog post. Once again, all credit for this idea goes to BrandVerity.

3 thoughts on “Affiliates in Nexus Tax States, Reverse Geo-Target In-State Traffic”

  1. Very interesting exploration of this topic, Geno! Appreciate the credit, but you’ve certainly taken this much further than we had on Twitter. Nice work.

    Originally, we were thinking of it primarily within the context of paid search (the affiliate not placing ads in the affiliate’s state of residence), but you’ve shown that there’s much more to it than that. With a clever technical approach, an affiliate could prevent any visitor from within its own state from seeing its affiliate links.

    Of course, the geolocation of some visitors may not match their permanent residence (e.g. a traveler using his/her laptop in WA who actually lives in CA)—but that portion of traffic would be relatively low.

    Hopefully this is some good news for affiliates in nexus states!

    1. In essence, my idea is mere piggybacking off yours. So, thank you (for making me think).

      I do think this could work really well (even though there will be that “traveler” factor which you have mentioned, but it will be pretty insignificant to impact anything); and larger affiliates should lead the way here. They are the ones who are losing the most due to these terminations.

  2. Pingback: Marketing Day: January 31, 2013

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