Monday, March 08, 2010

Has Amazon gotten too big for its britches?

This morning I woke up to find an email from Amazon, stating that they were closing the accounts for all Colorado-based affiliates. Apparently the Colorado legislature passed a bill that would require Amazon to collect sales tax for Colorado sales.

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.

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

At first, I was angry at the legislature for passing the bill. But a few things started to occur to me:

1) Amazon totally misrepresented the bill in their email. Basically, the bill states that if an out-of-state retailer has Colorado-based affiliates soliciting business for them, they are responsible for collecting Colorado sales tax. The bill also states provides recourse if a business that fits this description refuses to collect sales tax. You can see the full text, along with all the revisions, here.

2) Amazon isn't trying to protect affiliates. They are simply trying to avoid having to collect sales tax. They don't even have to pay the sales tax, just collect and track it, and they are still willing to throw their affiliates under the bus to avoid doing so.

3) It was Amazon's decision to dump their Colorado-based affiliates. Not the Colorado legislature's. In fact, the latter tried to write the bill so that it would protect the affiliates. So if I want to be angry with someone, it should be Amazon, not our lawmakers.

4) This is hardly Amazon's first instance of trying to throw their weight around in order to another entity to do something that benefits them, Amazon. Two years ago they tried to force POD publishers to use their printer, BookSurge, in order to sell self-published books on their site. Booklocker sued Amazon under the antitrust laws, which Amazon settled back in January. Also in January, Amazon turned off the "Buy" buttons for MacMillan titles in an effort to force the major publishing company to sell their ebooks for $9.99 or less. MacMillan refused, and Amazon gave in, restoring the Buy buttons on the publisher's titles. And supposedly, Amazon has intervened in other states with similar sales tax legislation — in those cases, with more success.

So when I finally wrote to the governor and representatives, it wasn't to complain — as Amazon wanted — but to say that I hoped they didn't give in to Amazon's bullying tactics. No corporation should be able to strongarm legislation like that.

Here are a few links with more information on the situation:

Amazon.com Associates Central discussion thread
Amazon Pulls Affiliates Out of Colorado, Gov. Ritter Responds
Amazon fires Colorado affiliates in protest
Colorado Lawmakers Ruin My Amazon Affiliate Sales (Be sure to read the comments!)
Amazon Fires Its Colorado Associates (Another blog post with a very heated comment thread)
Amazon.com needlessly fires affiliates in tantrum over tax law

I'm done with Amazon, even if they restore Colorado-based affiliates. (I expect they will, because it doesn't sound like the Colorado legislature will give in — good for them! — and Amazon won't want to lose all those referrals permanently.) I'm in the process of finding an affiliate program to replace Amazon on my websites, and in the meantime I'll be slowly taking down my Amazon links.

I'm also done buying from Amazon, and I encourage others to do the same. There are much worthier businesses to support, both online and locally!

Update 3/9/2010 1:00 am:

In reading the last couple of links listed above, I found out something interesting: The version of the bill I linked to is not the most recent. So far I haven't found the version of the bill that was passed, but apparently it removed all references to affiliates — in other words, it made it so that having affiliates in Colorado had nothing to do with Amazon's responsibilities under the law. Furthermore, they are not required to collect sales tax, only to notify Colorado customers that sales tax is owed.

One of the representatives I wrote to this afternoon wrote back to say that in actuality, sales tax is always owed on Internet purchases — this bill just requires online retailers to notify customers of this fact, since most people don't realize it.

I'll update with more information as I get it, so be sure to check this post again later!

Update 3/9/2010 1:26 am:

I believe that this is the most recent version of HB 10-1193. As you can see, no mention of affiliates.

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