There’s been a lot of controversy over California’s new online marketing tax, and the decision of mega-affiliate programs like Amazon and Overstock to withdraw from the state to avoid paying it.

This may not directly affect poker and gaming affiliates, which aren’t regulated in California and not subject to the tax.

But consider this:

  • If online poker is regulated in California, as some lawmakers are trying to do, then the poker affiliate programs that are eventually approved and put into action will likely be taxed.
  • As a gaming affiliate, you may also dabble in other affiliate verticals, and Amazon is the most popular affiliate program nationwide. If it isn’t affecting you or your site, there’s a good chance it’s affecting some of your competition.

Here’s a closer look at what the “Amazon tax” is and what it might mean for gaming affiliates.

What it is
California has a new law, signed this summer into by Governor Jerry Brown and already in effect, that requires sales tax to be charged for internet purchases. The law only applies to companies that have connections to California in the form of employees or retail centers — and that includes Amazon and Overstock.

In response, Amazon sent emails to around 10,000 affiliates notifying them that their contracts were effectively terminated.

“There are about 25,000 affiliates in California,” Reuters reports. “Some even have dozens of employees, and if they want to continue using the affiliate program as an income stream they will be forced to move out of state.”

What you need to know
As goes California, so goes the nation? Maybe: California isn’t the first state to implement this tax, but, as with most initiatives, its action will probably be followed by other states.

New York, Illinois, Rhode Island, and North Carolina have already passed such laws. Many more states, such as Arizona, Hawaii, Louisiana, Massachusetts, Minnesota, Mississippi, Missouri, New Mexico, Tennessee, Texas, and Vermont, are considering doing so. (The ongoing “recession” isn’t helping matters.)

So, the effects on small business will be twofold, good and bad:

  • Small businesses selling products could benefit from this, as they see greatly reduced competition from Amazon and Overstock
  • Small businesses that are actually affiliates or online resellers will face dramatic changes to the way they can do business. Some able to flee California may do so, but they day could come when the tax reaches other states as well.

“This law won’t impact Amazon that much but it is a crisis for website owners who make revenue by placing ads on their websites for thousands of online retailers,” says marketer Rebecca Madigan, via BlogWorld.com.

What can you do?
And that’s us, right? We’re the people who make money by affiliate marketing and ad clicks. So, what can we do about this?

The law has already passed, but that doesn’t mean it can’t be repealed. If you’re in the U.S., especially if you’re in California, make sure your representative knows what you think of this law.

And just because casino and poker affiliate marketing aren’t impacted by the law at all yet, don’t get the false impression that it never will be. If this trend continues, and if California eventually launches a state-operated online poker network, you can bet that’ll be taxed, too.

If that happens, the only way to cope may be adjusting your revenue plan to account for these taxes — and accepting that this money is going into the government’s pocket.

After all, many bloggers already do accept the tax as a necessary step, and are directing their anger not at the State of California, but at Amazon for so quickly cutting ties to the thousands of affiliates with whom it’s had such a successful relationship over the past decade. (Read one such argument here.)

Comments?
What do you think? Is this the beginning of the end of the glory days of untaxed online marketing? And if so, is that a good thing? Or is life for affiliate marketers as we know it about to get a lot tougher? Sound off in the comments and let us know your thoughts.


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