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.

Although I am not an Amazon affiliate, my wife and mother-in-law both are. My mother-in-law especially has hundreds of blog posts and at least many dozens if not hundreds of Amazon links in place on her blogs.

Colorado affiliates including myself successfully lobbied to get affiliates removed from HB-1193. Lawmakers excluded affiliates from the bill and passed it. Amazon must have decided they didn’t like the bill and decided to fire all Colorado based affiliates.

The biggest crime here is that Amazon is leaving all links in place and accepting sales from these Colorado affiliates. So affiliates who have spent years building up businesses may have 1000′s of links in place over many websites through which customers are still flowing to Amazon. The only thing Amazon has changed is that they are no longer paying Colorado affiliates their hard earned money. I’m praying for a class action lawsuit. Anyone know a good lawyer?

Below the Fail-ometer is a copy of the letter my family members received yesterday:
“The Fail-ometer”

“Dear Colorado-based Amazon Associate:

We are writing from the Amazon Associates Program to inform you that the Colorado government recently enacted a law to impose sales tax regulations on online retailers. The regulations are burdensome and no other state has similar rules. The new regulations do not require online retailers to collect sales tax. Instead, they are clearly intended to increase the compliance burden to a point where online retailers will be induced to “voluntarily” collect Colorado sales tax — a course we won’t take.

We and many others strongly opposed this legislation, known as HB 10-1193, but it was enacted anyway. Regrettably, as a result of the new law, we have decided to stop advertising through Associates based in Colorado. We plan to continue to sell to Colorado residents, however, and will advertise through other channels, including through Associates based in other states.

There is a right way for Colorado to pursue its revenue goals, but this new law is a wrong way. As we repeatedly communicated to Colorado legislators, including those who sponsored and supported the new law, we are not opposed to collecting sales tax within a constitutionally-permissible system applied even-handedly. The US Supreme Court has defined what would be constitutional, and if Colorado would repeal the current law or follow the constitutional approach to collection, we would welcome the opportunity to reinstate Colorado-based Associates.

You may express your views of Colorado’s new law to members of the General Assembly and to Governor Ritter, who signed the bill. [3 links removed]

Your Associates account has been closed as of March 8, 2010, and we will no longer pay advertising fees for customers you refer to Amazon.com after that date. Please be assured that all qualifying advertising fees earned prior to March 8, 2010, will be processed and paid in accordance with our regular payment schedule. Based on your account closure date of March 8, any final payments will be paid by May 31, 2010.

We have enjoyed working with you and other Colorado-based participants in the Amazon Associates Program, and wish you all the best in your future.
Best Regards,

The Amazon Associates Team”

There was a strong grassroots movement of affiliates opposing the Colorado affiliate tax. Many people wrote letters, made phone calls, and showed up to testify in person.

HB 1193 was modified on 02/08/10 eliminating affiliates from it’s terminology. Lawmakers succeeded in preserving 100′s of jobs that are pumping money into Colorado’s economy.

UPDATE: Well Amazon decided to fire affiliates anyway and keep their business at the same time.