Ryan Jones Blog – dotCULT.com Ryan Jones Blogs About Internet Culture, Marketing, SEO, & Social Media

July 1, 2009

More Companies Should Follow Amazon’s Lead

Filed under: Main — Ryan Jones @ 12:02 pm

In an effort to try to boost failing state economies, many states are starting to look for legal loopholes that would allow them to tax online purchases. Take Rhode Island and North Carolina for example. Frustrated with not being able to tax Amazon.com purchases, the states introduced legislation that would count all affiliates as “employees.”

That means all the people who post links to Amazon products and get paid a small fee if somebody clicks that link and buys something would all be “amazon employees” for tax purposes. Why is that important? Counting them as employees means that Amazon has a physical presence in the state, thus could be assessed a state sales tax.

So how did Amazon respond? They said “fine, we’re closing our affiliate program in Rhode Island and North Carolina.” End of problem.

I’m sure that led to thousands of pissed off Amazon affiliates who must now find other ways to monetize their blogs and websites. Hopefully these people will direct their anger toward their state legislation and not toward Amazon.

From my perspective, Amazon did the only thing it could. Re-coding their site, setting up tax collection infrastructure, hiring the necessary people, and paying the taxes would have been a monstrous undertaking – one most likely comparable to or greater than the losses they’d see from ditching the affiliates. Then there’s the legal precedent set by complying with this legislation that would open the doors to all states to do similar. Then, Amazon is screwed.

I just wish more companies would have the balls to pull this. When South Carolina raised a stink about Craigslist, the site removed its erotic services postings. Part of me wishes that they would have said “fine, we’re blocking all South Carolina traffic.”

When news sites threaten to sue Google or just plain bitch, I’d love to see Google say “fine, we’re taking your news site out of our index.”

If more companies started following Amazon’s lead, eventually legislators would come to realize just how stupid they are. If they didn’t, I’m sure their constituents would surely tell them.

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