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Amazon Cuts Off North Carolina Affiliates 411

Posted by ScuttleMonkey
from the court-of-public-opinion dept.
Amazon.com has reportedly cut off all affiliates in North Carolina as a preemptive response to the sales tax change being pushed through the state legislature. The Seattle-based online retailer warned affiliates last week that such a move might be necessary, but the early shutoff seems to be a move in hopes of swaying opinion on the proposed legislation. "Local affiliates say they were 'blind-sided' by the company's action. 'I got this e-mail at 4:30 this morning,' said James Barrett, a technology consultant from Winston-Salem. 'It wasn't saying your account will be shut down. It said it is shut down. That just blew me up right there.' Barrett said that he is frustrated at lawmakers for considering the tax, but equally aggravated with Amazon. 'They're trying to tick off all their associates and get them to call down to Raleigh,' Barrett said. 'I think that is pretty tacky. That's not the way to use people who are referring business to your business.'"
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Amazon Cuts Off North Carolina Affiliates

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  • by vivaoporto (1064484) on Friday June 26, 2009 @02:56PM (#28486495)
    That's the real meaning of "voting with your feet". There is an unjust law, or even a just one that Amazon doesn't agree, and they don't want to be subjected to it, so they move out of the state.
    • Re: (Score:3, Interesting)

      by Chabil Ha' (875116)

      Too bad it has to be that way, but it is much easier to kill a bill than to kill the resultant law. I hope NC's (attempted) money grab was worth it.

    • by erroneus (253617) on Friday June 26, 2009 @03:54PM (#28487295) Homepage

      Yes, it is unfortunate that N.C. sellers had to suffer for it, but I have to agree with Amazon's action on this. At every turn, government at all levels seek more and more money rather than taking a hard look at where they are spending it. Ultimately, I believe, they simply want more money to vote themselves higher pay and to return favors of their campaign donors. I wish there were a better way to run government. I vaguely recall one or more SciFi movies in the past where a city became a business or something to that end... the prospect was frightening, but I have to wonder if such a project were applied properly, if it wouldn't be run more efficiently. One problem with current styles of government is that there is little to no incentive to save money or to use it wisely. They have no profit motive and clearly no personal integrity or desire to serve motives. So I have to wonder, what motives would cause governments at local, state and even federal levels to deliver "good service" to the people at the lowest cost possible?

      • Re: (Score:3, Interesting)

        by ink (4325) *

        They have no profit motive and clearly no personal integrity or desire to serve motives.

        Yes, clearly, all politicians lack personal integrity -- and if they had a profit motive they would be full of integrity. </sarcasm>

        At every turn, government at all levels seek more and more money rather than taking a hard look at where they are spending it.

        Wait, I thought they had no profit motive...

        Perhaps North Carolina is upset because local business are closing due to the tax disparity? Amazon sneaks in as an interstate institution, and they know that if residents have to pay tax in addition to shipping, their customers will be more likely to patronize local business. The same places that provide property tax and

        • Re: (Score:3, Insightful)

          Perhaps North Carolina is upset because local business are closing due to the tax disparity?

          Chicago infamously addressed an automobile tax disparity by forcing suburban car dealerships to collect City taxes. City dwellers could no longer escape the inordinate tax by buying in the suburbs; Chicago argued that place of residence, not place of purchase, determined the sales tax. Except, that is, for suburban dwellers who might have bought a car in the city. For them, it was the other way around. Now they're trying the same thing with *all* car rentals in the entire 6-county suburban area. (They *migh

      • Re: (Score:3, Insightful)

        by BitZtream (692029)

        How and why is Amazon supposed to be treated differently than say, Walmart?

        Walmart seems to be able to handle the tax issue, why is it Amazon can't do the same?

        • by bangzilla (534214) on Friday June 26, 2009 @06:15PM (#28489101) Journal
          Walmart has a physical operation in NC and the ability to collect and process taxes. Out of state vendors (Amazon being just one or many, many) does not. Don't forget that this law, if it passes, will impact all out of state eCommerce vendors. Perhaps the large ones will say "we do enough business in NC and will set up a physical presence to process tax" but the many, many smaller entities will just drop this state. That will be painful for them and their customers within the State.
  • by infinite9 (319274) on Friday June 26, 2009 @02:57PM (#28486511)

    ... even if it is a bit assholeish. It sends a loud and clear message to the NC government that the legislation will hurt local businesses.

    • by elloGov (1217998) on Friday June 26, 2009 @03:03PM (#28486605)
      I agree. This is admirable response by Amazon. Even legal thievery has its limits. NC is laying claims beyond their jurisdiction in my opinion.
    • by scorp1us (235526) on Friday June 26, 2009 @03:26PM (#28486861) Journal

      We're seeing more and more of this retaliation.

      Green Day recently declined to make a censored version of their album to meet Wal*Mart's demands. Wal*Mart thought that they could strong-arm anyone into making an non-explicit version. But lost out, because the album is doing quitewellthankyouverymuch.

      On a more historical note, the founders of this great nation realized that smuggling was a good thing. As taxes became oppressive, the more reason there was for smuggling. They saw it as a great balancing factor. They state had to choose to keep the taxes low, or let a larger amount go untaxed, in addition to a drop in sales, like they are seeing with the new tobacco taxes.

      The current government is advantaged because of electronic record keeping, where some SQL statement can spot discrepancies for additional investigation.

      But there is no reason why the governments should have license to grow when its supporting economy just dropped 20%. To argue otherwise is to argue that you can tax a nation into prosperity, or that you can lift yourself up by your boot straps.

      I applaud Amazon for having gravitas. I also wish the best for those affiliates in NC. Hopefully they will speak up and fix the taxation, or NC will learn to go without.

      • Re: (Score:3, Insightful)

        by samweber (71605)

        Okay, currently in NC businesses which sell directly to NC residents collect sales tax, but NC businesses which sell to NC residents via Amazon don't. Whether or not you agree with NC's proposal, there are more factors here which I don't think you've considered.

        the founders of this great nation realized that smuggling was a good thing

        To the contrary, the United States was set up as a nation of laws and with the assumption that there would be taxes. There's nothing that excuses smugglers from the legal system.

        But there is no reason why the governments should have license to grow when its supporting economy just dropped 20%.

        Firstly, the proposed change in no way "grows" the government. It is

        • by roc97007 (608802) on Friday June 26, 2009 @06:32PM (#28489247) Journal

          > What is the state to do?

          Well, one thing they could do is create rainy-day funds during times of prosperity instead of growing the government a corresponding amount. Some states do this, but I think most don't bother, because a big lump of cash sitting there is too much of a temptation to spend. And investing the rainy day funds raises the risk of being wiped out in the same downturn that the funds were for.

          Regarding maintaining roads, at least in my state that's the first thing they cut out of the budget in a downturn. Speaking as someone who recently had a $3,000 insurance claim for damage done to my vehicle by a really deep pothole downtown.

          But back to the question above, "what is the state to do?", it is a conundrum, because increased taxes in a downturn invariably stalls recovery, putting the government in an unwelcome position -- charity now, or prosperity later? The additional cost of the taxes to pay John Q. Unemployed's extended unemployment benefits may have been the money the company needed to hire him. Or worse, it may be the impetus for the company to move to a more business-friendly state, causing the jobs to disappear forever.

        • Re: (Score:3, Insightful)

          by Peter La Casse (3992)

          What is the state to do?

          Minimize the impact of fluctuations in revenue by minimizing government services and expenditures.

          Solve the problem of bureaucracy ("the bureaucracy is expanding to meet the needs of the expanding bureaucracy") and apply the fix to every state and local government.

          The state should be fiscally prudent so that it is able to borrow money to make it through temporary tough times. Then, since it is fiscally prudent, it will be able to pay that debt off during good times.

          Obviously n

      • Re: (Score:3, Interesting)

        by BitZtream (692029)

        So just curious, as more and more companies do like Amazon and more and more purchases are made from out of state due to this sort of web service ...

        What do you think states should do to deal with the lost revenue.

        Amazon seems to have no problem taking money from people in North Carolina. I don't see them paying their own state any taxes on those sales.

        Its not like they don't just pass sales tax along to the customer like every other business ANYWAY.

        Its not like Amazon itself is paying the taxes to NC.

        Don'

    • by lewp (95638) on Friday June 26, 2009 @03:59PM (#28487385) Journal

      I agree. Amazon is losing sales on this too, so it's not like they're just screwing the little guy. They're putting their money where their mouth is.

    • Re: (Score:3, Insightful)

      by BitZtream (692029)

      What message is that?

      If you don't let us get by without paying taxes we're going to take our toys and go home!

      Is that the message you're referring to?

      Amazon doesn't have the guts to stop selling to NC itself, that would cost them too much money, they just want to hurt the little guys. You know, the affiliates they use as cannon fodder on a regular basis?

      Hopefully NC will amend the law to require anyone shipping a product into the state to collect sales tax on the sale and distributed it to the state. Of c

  • They Had Warning (Score:5, Informative)

    by eldavojohn (898314) * <[moc.liamg] [ta] [nhojovadle]> on Friday June 26, 2009 @02:57PM (#28486515) Journal

    Local affiliates say they were "blind-sided" by the company's action.

    I'm sorry, sir, I normally restrict myself to civil language but you are so full of shit.

    I don't even live in North Carolina and recalled reading about 'warning' letters sent to you [accountingweb.com]. Maybe you should open up your e-mails from June 17-18:

    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 www.ncleg.net and additional information may be obtained from the Performance Marketing Alliance at 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

    You were warned! Tell us, James Barrett, how many letters did you sent to your representatives demanding they strike down this unconstitutional tax?

    Yes, it came early. But you were warned. Unwittingly operating for one day could set Amazon back thousands if not tens of thousands of dollars. They tried blocking it with litigation in New York and they lost. Don't get made at them for playing it safe, you have no one to blame but your elected officials.

    • Re:They Had Warning (Score:4, Informative)

      by T Murphy (1054674) on Friday June 26, 2009 @03:20PM (#28486791) Journal

      North Carolina state legislature (the General Assembly) appears ready to enact an unconstitutional tax collection scheme

      For those who don't want to RTFA:

      The tax provision that Amazon objects to would apply sales tax to purchases made through such click through transactions from Web sites run by affiliates based in North Carolina.

      • Re: (Score:3, Interesting)

        by lalena (1221394)
        So if the user clicks through an affiliate to purchase an item, but that affiliate is no longer paid by Amazon, then is it taxed? Amazon is terminiating the affiliate accounts & future payments, but if an affiliate leaves the Amazon links up on their page I assume Amazon won't give them a 404 error.
  • blindsided? (Score:5, Interesting)

    by Red Flayer (890720) on Friday June 26, 2009 @02:58PM (#28486523) Journal
    1. If any of these affiliates were blindsided, it is because they didn't read the notice they were given last week. Of course, a single week's notice is too short anyway...

    2. Time for the referral businesses in NC to relocate. Or close up shop. We'd be happy to have them (and their income & property tax revenues) here in NJ.

    Of course, now it's only a matter of time before most states have similar laws. Then it'll be time for these businesses to relocate to the Cayman Islands.
    • Re:blindsided? (Score:5, Interesting)

      by vertinox (846076) on Friday June 26, 2009 @03:07PM (#28486653)

      2. Time for the referral businesses in NC to relocate. Or close up shop. We'd be happy to have them (and their income & property tax revenues) here in NJ.

      Or they could setup a proxy LLC in Delaware [wikipedia.org] through a registered agent [delaware.gov].

      • Which wouldn't help them, since they have a physical presence in NC and thus must pay NC sales tax.

        There are many many thousands of corporations registered in DE for business purposes, but don't think for a second that those corporations are not required to file and pay sales taxes in the states where they have a physical presence.

        And don't try to evade sales taxes that way either -- you'll either get nailed and have to pay fines and interest (or even get prosecuted for willful tax evasion), or at the ver
    • by Kohath (38547)

      Just think how much nicer NJ would be if people were valued for their humanity rather than just as sources of "income & property tax revenues". If these people needed a hint to avoid New Jersey, your post certainly provided it. Of course, they could have looked around to find that New Jersey has the worst business climate of any state in the US [heartland.org].

      My state (Minnesota) isn't very good either, but it beats New Jersey. I hope to move to an even better state soon.

      • by LotsOfPhil (982823) on Friday June 26, 2009 @03:29PM (#28486903)
        The only thing that would make New Jersey nicer is less New Jerseyans.
      • by timepilot (116247)

        Did you read the heartland.org article? It doesn't say that "New Jersey has the worst business climate," it says that "New Jersey has the worst business TAX climate."

        Big difference. This statement is based primarily on the breadth of the sales tax base.

        NJ doesn't tax toilet paper, food, or clothing. This places more of a tax burden on people buying TVs and cars, and less on people buying things like cereal for their kids. If that means NJ has a bad business tax climate, so what?

        Honestly, I'd rather pay 7% f

      • Just think how much nicer NJ would be if people were valued for their humanity rather than just as sources of "income & property tax revenues".

        Just how could I value these people for their humanity, when I have no idea if they are selfish twats or if they are decent human beings? The only thing I can judge them on, from the information available to me, is their monetary value to the people who live in NJ. They could be rapists or worse, for all we know.

        And as for NJ having a bad business climate... s

    • by couchslug (175151)

      [quote]
      2. Time for the referral businesses in NC to relocate. Or close up shop. We'd be happy to have them (and their income & property tax revenues) here in NJ.
      [/quote]

      Given the brutal property and income tax situation in New Jersey, they'd be better off moving a few miles to South Carolina.

      I'm from New Jersey, lived in both Carolinas, and retired in SC so I get to keep more of my income. :)

  • by guruevi (827432) <evi @ s m o k i n g c u be.be> on Friday June 26, 2009 @02:59PM (#28486537) Homepage

    is by biting them where it hurts: their pockets. You can add all the sales tax on out-of-state purchases you want (whether that is federally allowed -- I'm not sure), if you don't sell anything, you don't have anything to tax so revenue will remain 0.

    They probably saw what happened in NY and they don't want it to happen everywhere. Amazon decided to add tax to NY purchases and me and a lot of other people stopped purchasing from them because other stores (like NewEgg, TigerDirect and Geeks) were undercutting them by about 8%. Even though my organization is tax exempt I don't purchase at Amazon simply because they don't have the provision for me to state that I am tax exempt.

    • It's not zero, it's a negative amount, because these businesses will then stop paying a bunch of taxes that they are already burdened with.

  • It's not tacky (Score:5, Insightful)

    by rpillala (583965) on Friday June 26, 2009 @03:06PM (#28486627)

    That's not the way to use people who are referring business to your business.

    That's exactly the way to use people who are referring business to your business. The only thing that motivates a business "relationship" is the exchange of value. If the proposed law was going to cause this change anyway, making it early as an example is the way to get people to "call down to Raleigh."

  • not tacky (Score:5, Insightful)

    by v1 (525388) on Friday June 26, 2009 @03:15PM (#28486733) Homepage Journal

    They're trying to tick off all their associates and get them to call down to Raleigh,' Barrett said. 'I think that is pretty tacky.

    Sounds like an excellent way to motivate your local associates to get their arses over to the capital and ride their representatives. There's not a great deal Amazon can do directly to fix this, they have to rely on their local affiliates to keep the local conditions amicable to their business. If the locals aren't moving, then it's time to light a fire under them.

    Got their attention too didn't it? Sounds like it's working as intended to me...

    • Re: (Score:2, Insightful)

      by BitZtream (692029)

      There's not a great deal Amazon can do directly to fix this

      Oh? They couldn't boycott NC themselves?

      So its good for them that they go ahead and push it off to someone else, but they don't take a hit themselves?

      'I'm not going to let you sell my stuff because your state did something bad sorry it hurts you, by the way, I don't really want to get hurt myself, so I'm going to keep selling all day long and continue making money while you don't.'

      Are you serious? Don't give me this bullshit like Amazon is doing t

      • Re: (Score:3, Insightful)

        by idontgno (624372)

        Oh? They couldn't boycott NC themselves?

        Why are you advocating the nuclear option? This is an incremental escalation, and a focused response to the specific issue. Amazon would consider boycotting NC if NC made a credible play at their direct sales. NC hasn't, and NC can't.

        Good Lord, why don't you just suggest Amazon hire ninja assassins to off NC's legislature? That's about as over-the-top.

        So its good for them that they go ahead and push it off to someone else, but they don't take a hit themselves?

        They

  • good for amazon! (Score:5, Insightful)

    by superwiz (655733) on Friday June 26, 2009 @03:21PM (#28486811) Journal
    Finally some business demonstrating some balls. If the tax is being considered, then the locality has an environment hostile to Amazon's business. It doesn't matter if it goes through. The fact that they see nothing wrong with their hostile attitude is enough of a reason for Amazon to declare that they will have nothing to do without them. No business with bullies -- not even with those who associate with bullies by living in their tax base. Good for them!
  • by goffster (1104287) on Friday June 26, 2009 @03:29PM (#28486909)

    Can a company move to a US territory and still get all the perks ?
    i.e. Puerto Rico ?

  • Unfair? (Score:5, Insightful)

    by sjames (1099) on Friday June 26, 2009 @03:39PM (#28487015) Homepage

    The legislator claims it's not fair that brick and mortar stores collect sales tax and Amazon doesn't. I say the brick and mortar collects taxes according to ONE tax structure in ONE place. What's fair about an out of state retailer having to understand potentially thousands of sales tax structures in many different combinations? Not to mention then needing to keep books on thousands of accounts to make sure the various state and local tax collectors get said taxes.

    Unless and until the various legislatures are willing to get together on a simple clearing house to make it easy for retailers to figure out how much to collect and where to send it, they have little choice but to not do business in places that insist on it.

    NC is already proving that such questions could be hard to answer. Whose taxes do we collect, the billing address? the ship to address? The address where the affiliate's server is located? NO! We must collect for the physical address of the person who owns the affiliate site. At least this week. No doubt the eventual answer (at least the one legislators will want) is ALL OF THE ABOVE AND MORE! In all different amounts with a whole table full of thresholds, percentages, and exceptions. OH, and different addresses to send the checks to with different required documentation and forms to fill out. Each and every one of them will claim that their tax is very simple and effortless to collect. None will recognize that the sheer volume and lack of standardization makes the matter impossible.

  • What about NY? (Score:3, Insightful)

    by TheNinjaroach (878876) on Friday June 26, 2009 @03:43PM (#28487083)
    Where was Amazon when New York passed a similar law? I guess cutting off the entirety of NYC from Amazon.com would prove to be too costly, so they wait for a smaller (and therefore less profitable) state before they decide to play political hardball. It is Amazon's right to pick and choose their battles, I just can't help but think the US would be better off if they would have started this with the first state to try such a stunt rather than picking on the easiest.
    • Re: (Score:3, Informative)

      by HarrisonFisk (624200)
      NY state does a tax on residents that purchase things from someone online with a NY affiliate. So if I live in NY (which I actually do) and buy an item from Amazon then I have to pay tax on it. This only affects the people of NY.

      From what I understand the proposed NC law actually says that anything sold to anyone via an NC affiliate link would need to be taxed. So if someone lived in PA and bought something from Amazon, if they went through a NC affiliate link, it would be taxed by NC. This is not on
    • Re:What about NY? (Score:5, Interesting)

      by Pollardito (781263) on Friday June 26, 2009 @04:17PM (#28487643)
      The article indicates that they sued in NY for a similar law and lost, but are continuing legal challenges there. It doesn't sound like they cut off referrals though.

      What's ridiculous is that this law doesn't seem to tax based on the location of the seller or the buyer, but instead on the location of the referrer. Sales tax is supposed to be a tax on the buyer, and it just happens to be the responsibility of the seller to collect it. So NC is trying to charge a sales tax of a buyer that isn't a resident.

      It might sound sensible to take a cut of that referral money (since that's the party that's in state), but they're already taxing that by charging income tax to the referrer.
    • Where was Amazon when New York passed a similar law? I guess cutting off the entirety of NYC from Amazon.com would prove to be too costly,

      Maybe now that they've found their manhood again they will cut off NY once the legal challenges play out. I'd like to see it happen long enough to stop this from spreading any further. States are copycats about this kind of crap.

  • And I think anyone claiming to be "blind sided" is either full of it or a whiner, possibly both.

    Also: the way to fix it isn't talking to a media outlet, it is talking to someone in Raleigh. (no, not a media outlet in Raleigh).
  • Go For It Amazon (Score:4, Interesting)

    by Nom du Keyboard (633989) on Friday June 26, 2009 @04:01PM (#28487415)
    Go for it Amazon! Put the finger in the dike now before we all get flooded out by greedy state governments whose legal justifications aren't even substantial enough to call flimsy. This is like Wal*Mart closing stores that go union because the problems of dealing with the issue overall far outweighs the losses from leaving a given market. I wish that the automobile makers had stood up to the State of California when they went completely nuts on the emissions regulations and instead of saddling us with thousands in additional new car costs, had simply said: "No new cars for you." Who do you think would have blinked first? The automakers? The state? Or the voters?

    Yes I'm sorry that people are getting hurt along the way with this, but go out there and get your state back in order once more and this won't be happening.

    Disclaimer 1: I sell on Amazon and I'm still all for this.
    Disclaimer 2: I lived in California and breathed that air every day.
  • the early shutoff seems to be a move in hopes of swaying opinion on the proposed legislation.

    No, that's not correct. The early shutoff is to show that Amazon is truly serious about this and not just blowing smoke. There is now no doubt that Amazon isn't bluffing. NC will get no tax money from them.

  • Rhode Island too (Score:5, Informative)

    by MrP- (45616) <rob@eliEULERtemrp.net minus math_god> on Friday June 26, 2009 @06:35PM (#28489277) Homepage

    Got this email this morning from Amazon:

    "We regret to inform you that the Rhode Island state legislature is preparing to pass an unconstitutional tax collection scheme that, if passed and not vetoed by the governor, would leave Amazon.com little choice but to end its relationships with Rhode Island-based Associates. You are receiving this e-mail because our records indicate that you are an Amazon Associate and resident of Rhode Island.

    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, we will have to terminate the participation of all Rhode Island residents in the Amazon Associates program on or before the day on which is it enacted. 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 Rhode Island residents.

    Note that 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 unfacts, did we have them, are too imprecisely few to warrant our certitude.

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