It was inevitable that CA would pass this tax meant to increase tax revenue. As misguided as it is, you can’t expect a bunch of doddery old politicians to understand the economics of the internet.
Fuck California for taxing even more money from it’s people!
Fuck Amazon for dropping 1000′s of affiliates while still accepting traffic and sales from their sites. I think it’s often overlooked that there are countless online businesses which people have spent years building. These websites may have large volumes of visitors flowing through them to Amazon.com. Amazon is still accepting all the sales generated by affiliates but isn’t paying those affiliates for their hard work. It’s outright theft! I’m angrier at Amazon than California.
Enough ranting. Time to move on. Here in Colorado we faced the same thing many months ago. I remember reading news stories of Colorado based affiliates moving out of state to save their businesses. I didn’t move, but I still control an active Amazon affiliate account and they pay me from time to time. Here’s how:
1. Establish an out of state LLC or similar entity.
2. Use their registered agent service to forward your mail.
3. Open a bank account in the company’s name. It can still be a CA bank account.
That’s about it….and it’s a legit workaround. The LLC is a legal entity similar to a person for the purpose of opening an Amazon account. The LLC is the affiliate. You are merely an employee of said company. Amazon pays the company, then the company pays you. Because the LLC isn’t in CA, you shouldn’t have any troubles.
Now, where do you go from here? Well, out of state LLC’s have been very popular in Delaware, Nevada, and Wyoming. I’ve done some research on it and like Wyoming the best. Delaware is best for companies with stockholders. Nevada is OK but has occasionally thought about weakening some of it’s strong points. Wyoming has no state income tax and has never had legislation which threatened all the strong points of Wyoming LLCs.
I personally really like the “Wyoming Close LLC” entity and have 2 of them myself. The “Close LLC” is meant for family owned businesses and is well structured for estate planning. If you have lots of money, or plan on having lots of money, it might be a useful entity.
Remember that you need a registered agent service to forward your 1st class mail. They’ll forward your 1099′s and so forth. My personal experience is that the mail forwarding is marginal, so I won’t be recommending either of the 2 registered agents I currently use. But it still gets the job done.
Also, my experience of opening them was that it took FOREVER (7 weeks) with one of them. The other took about 2 weeks. If you have a serious Amazon business, you may want to pay to expedite service and would be well advised to compare complaints that different agents have received. Check the Better Business Bureau.
I also shopped for the cheapest services over the long term and may be getting what I paid for. That being said, you can switch registered agents if you have trouble with one of them.
Here is an affiliate link to a pretty big outfit. I’ll get a few bucks if you choose these guys. But I haven’t tried them out myself. www.incorporate.com
P.S. It doesn’t have to be Wyoming. Maybe you have trusted friends or relatives out of state somewhere. You can set up an LLC in any state that Amazon still accepts. Several states have no state income tax. Costs vary state to state.
Did I leave something out? Got a question? Please comment and tell us what you think about the Ca affiliate tax.
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Thanks for the informative article.
I’ve been thinking about registering an LLC in NV for affliate programs (and to eventually run a company through). I believe 7 states now have passed tax laws that have cause Amazon to drop their affliate programs (with I’m sure more to come). Do you feel that states without a sales tax would likely last the longest?
I was wondering what registered agents you have used, and if you could give me any advice as to a good (and cheap) one. I just need the most basic services at this point.
I’d much prefer Wyoming over Nevada. Instead of looking at sales tax and so forth, consider that Nevada has a budget defecit. They will be looking for ways to raise taxes. Wyoming is one of the few solvent states.
I have used two registered agents in Wyoming. Both have been okay, but not good enough for me to recommend. At the same time, they have been adequate enough that I don’t want to say bad things about them either. Note that I shopped for the cheapest ones and may have fairly gotten what I paid for.
I have it narrowed down to Wyoming and Nevada for where I want to register my LLC. There is more for me to consider than just affliate programs.
I’m not totally sure as to Wyoming’s laws… but NV allows certain things like: single member LLCs; meetings to not have to take place in NV, nor any member of the company to live in NV; lack of a formal information-sharing agreement with the IRS (that’s the mob’s doing i’m sure haha); and no capital gains taxes. How does Wyoming standup to that?
What you’re saying about a budget deficit makes sense… but do you think that’s just a temporary hardship? It seems to me they wouldn’t change laws negatively affecting business and forfeit their history of being a great state for businesses to come. They don’t seem to be as stupid as California :./
BTW, the registered agent I was looking at using is through myLLC.com, I believe called InCorp Services. Is this one of the ones you’ve tried?
Hi Brian,
Nevada is OK. I did my research and chose Wyoming 2 or 3 years ago. I’m not sure about the capital gains tax issue. I assume you’re referring to capital gains regarding selling a business. Regarding the other issues, I think you’ll find WY is very similar.
I think that NV would be MUCH more likely to impose an affiliate tax than WY. But they have also considered raising fees on business registrations in the past and may raise fees in the future to attempt to balance their budget. I think it’s about $50/year cheaper in WY at present. The fees may or may not concern you.
I didn’t go through myllc.com or incorp, but it might not change things. These types of websites that handle many states typically outsource the registered agent service which is the part that matters for customer service and mail forwarding. You might wind up getting the same address and registered agent as me anyway.
Through both of the services that I’ve used I’ve had some mail that didn’t get forwarded. Even a 1098 tax form got lost once. I shopped for the cheapest providers and that was probably a mistake.
Great info DB. I’m (obviously) very new to LLCs. I currently live in TX, but will likely be moving back to CA soon. So for now, I’m alright with Amazon Associates on my home address… but would need to change things over to an LLC upon moving back to CA.
How does an AA account work with an LLC? In the eyes of Amazon, would it look like a completely seperate entity from me (in other words, would there be any way they would know I was associated with the LLC)? I’m assuming I would need a federal tax ID for the LLC, as to not have to use my SSN. But wouldn’t I still have to put a name on the application?
I’m looking at Legalzoom.com for registering the LLC. According to them, it appears that there are only 3 things I’d have to pay for: Filing fee ($100), State fee ($75 – $100), and Registered Agent fee ($100+). However, they also say to check with the particular state you register in for any other fees. Now, I may have done too much research as to confuse myself, but it seems like there may be a number of other fees (including: “initial list of managers and managing members”, annual reporting fees, statement of officers fee, foriegn LLC fees, business license, CA franchise fee, federal tax ID application, etc etc).
Are you familiar with these fees and which ones would apply to an internet-only based business (such as AA)? I’m still also a little confused as to which of these are a one-time fee and which would repeat yearly. I’m just trying to figure out if I’m making enough $$ with AA to make it worth the price of an LLC at this point.
Hi Brian,
Moving to CA might be a problem for you if your income is marginal. I’m not certain, because it never affected me so I didn’t look that closely, but I think you might be required to pay $750/year once you move back to CA. Though, I don’t know how CA could enforce that. I would research that issue further if I were you.
My Amazon account lists the Payee Name as my LLC’s name, not my personal name. And it uses the registered agent’s address. Then the money is direct deposited into a bank account in Colorado (banned state). They don’t care about the bank account. And they have no reason to try to “enforce” the issue. Amazon isn’t motivated to keep you out. They only want to avoid sales taxes. Your LLC will completely protect Amazon legally, so you should have no fear of having your account closed. Also, note that I listed my cell phone number correctly even though it is a Colorado number. There is no reason that a Wyoming company can’t have bank accounts and cell phones purchased in Colorado.
Regarding all the fees…. Some companies charge too much and might try to fleece you. But the only fees you should be paying are Filing fees, State fees for registration and annual fees depending on the state, and Registered agent fees. The registered agent will also charge you mail forwarding and possibly fax and phone fees if you choose those options. The registered agent will probably take care of and bill you for recurring state fees. I pay about $100 -$150 for each of my two Wyoming LLC’s.
When I established them I paid about $350 – $450 each. But one of them took forever. (3 months) If you want to save money, you can register your LLC via internet or mail I think and save money and time. Once the LLC is registered you should apply for an EIN (federal tax ID number) If you do this yourself, this is instant. I registered a Colorado LLC online myself for $50 and got my EIN (free) that night.
To clarify, your yearly fees should not exceed $150-$200, ($350-$400 for people outside the USA registering a USA based business) NV state fees are a little more than WY I think. If your a smart person, you can bypass Legalzoom and do it yourself to save a couple hundred bucks. I was lazy and unsure of the process, so I used a similar site. So don’t feel bad. If you are happy to pay them to handle it that is fine. To bypass legalzoom you’d need to select a registered agent and list them on your forms.
Here is a list of registered agents in Wyoming. Call some of them and ask about recurring fees. Then choose one and register a company. A good one should be able to give you guidance in the registration process. If they can’t help you with that, they suck and you should call the next guy on the list.
Hi DB:
I went the incorporating in another state route, but got an email from amazon asking for address verification. Here are the requirements (just one out of these will do):
#Business license addressed to your business entity at the address used in your Associates account
# IRS Resale Certificate for Sales Tax addressed to your business entity at the address used in your Associates account
$IRS Federal Employer Identification Number confirmation letter, W-9, 990-EZ or other Federal Tax form, in each case addressed to your business entity at the address used in your Associates account
#Utility bill, not more than two months old, addressed to your business entity at the address used in your Associates account (examples include gas, electric, sewer, water, cable or phone bill). Cellular phone and pager bills are not accepted.
#Receipt for property taxes or real estate taxes paid within the last year for the property at the address associated with your Associates account and addressed to your business entity
# Current automobile or liability insurance bill in the name of your business entity and listing the address used in your Associates account (cards or policies are not accepted)
#Deed, mortgage, monthly mortgage statement, or rental/lease agreement, not more than two months old, in the name of your business entity and listing the address used in your Associates account
#U.S. Postal Service change of address confirmation form or postmarked U.S. mail with forwarding address label, in each case displaying the name of your business entity and the address used in your Associates account
but the thing is, it’s a shell corp…i don’t have a physical office there, how would I go about getting my address verified?
thanks
Hi Jeff,
The quick answer is to look for a “registered agent” in the state in question. Most if not all registered agents will forward mail. They throw away the junk mail though. The cost for your mail plan will vary depending on the agent.
Due to the forwarding costs, I minimize mail going to the agent.
I get debit cards and 1099′s forwarded for instance. They will put the entire envelope in a larger envelope and mail it to my home.
If you don’t have an EIN, that would probably be the fastest thing to do. You can get it here: https://sa2.www4.irs.gov/modiein/individual/index.jsp
If you already have an EIN, there might be an online form to change the address to your new registered agent’s location, then print it off immediately. I tried to check, but the service is down as I type this.
It seems to me that the Business license, sales tax license and car insurance could also be done via the registered agent. I don’t have these going through my registered agent, but I could.
For instance, even if you don’t need one, you could get a sales tax license, then just report zero sales.
Note that it is common for these large LLC creation websites to sub-contract the registered agent service. If they sub it out, it’s a pain to get them on the phone when you have a problem.
You can transfer your existing shell company to a registered agent service of your choosing. Registered agents need to be licensed and you should be able to find a list of them for your state. Get that list and start calling a few of them. Choose one and then move the shell company to their address. This should be a simple form which may be online, or fax’able. It will be faster if you do it yourself. But your new registered agent should be able to do it for you or walk you through it.
Step 1: Get the list of agents in the state where the company is registered
Step 2: Call them on the phone and make sure the phone number area code and prefix match the address. (You don’t want this sub-contracted)
Step 3: Have them help you with the transfer
Step 4: Now that you have mail forwarding arranged, get one of those things on your list with the new address. You should be good to go.
Note that mail forwarders like UPS stores are required by law to use addresses that include the letters PMB, making it obvious to Amazon or anyone else that’s it’s a mail drop. “PMB” addresses are often not accepted for certain important things. I doubt Amazon would accept a PMB address. But the registered agent solution is legal and not obvious and is not required to use “PMB”.
WOW, thanks for the amazing reply!!! I’m kind of speechless actually, at the amount of trouble you went through to replay to a comment.
I have an EIN, and a registered agent, and mail forwarding set up, i think where i went wrong is by adding the PMB in the address. I’m going to contact my registered agent or my mail forwarding company and see if I can get a business license with the address on it.
Thanks again your detail reply.
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