A Little Perspective on Amazon and Taxes

For ten years, Amazon has offered an “affiliate” program. Affiliate marketing is a great thing. Basically, you give people a special link. When they send people to your web site, you give them a commission fee. It might be 1% or 5% or 10%. Whatever works in a specific industry.

Basically, you embed an affiliate code inside the gobble-dy-goop link like this:

http://rcm.amazon.com/e/cm?t=grelitboo-20&o=1&p=8&l=as1&asins=0976376016&ref=tf_til

See

that part that says t=grelitboo-20 ? That’s me. That says I referred the sale.

Well, don’t get too excited. The biggest online book seller – Amazon – has stopped offering their affiliate program in any state that charges sales tax for online purchases. I believe California is the ninth state to impose sales tax for online purchases, and the ninth state where Amazon has killed their affiliate program.

In my opinion, this is a smoke-and-mirrors move by Amazon to simply eliminate their affiliate program. They need a good excuse. They think they’re big enough that they don’t need the referrals. And either 1) They don’t earn enough new sales to justify the ongoing cost, or 2) They believe they won’t lose enough sales to make any difference.

But it is NOT about sales tax. I can tell you, as a reseller of many things, that sales tax is simply passed on the the customer. If sales tax is 8% then a $1.00 purchase costs $1.08 and I have to pass 8 cents on to the state. We lose a little money in the transaction because we have to collect this money, store it, fill out all the forms, and pass the money along to the state. I pay all the labor on that.

On Taxation

I was involved in the early years of the Internet. By that I mean I was involved from 1983 until 1994 when commercial businesses could get connected to the Internet without justifying why they needed to be connected. And, of course, I’ve been involved since 1994 as the world wide web took over the Internet (before that, we used text-based tools).

In the “early years” of 1993-1996 there were legitimate debates about whether Internet-based transactions should be taxed. Taxation reduces use. So, it made sense to NOT tax Internet-based transactions because we didn’t want to slow down adoption. Of course the big dot com bubble pretty much showed that people were loving this new technology.

For the last ten years, The Internet has been simply a part of commerce. It is the way business is done. And taxing those transactions just makes sense.

I am a pretty conservative guy, financially. But IF sales tax is the way to fund a government, then excluding Internet sales does not make sense.

The Truth About Amazon

Many people have a sense that Amazon is one of the “good guys” in the Internet commerce world. And in many ways they are. But they are also the 800 pound gorilla that doesn’t care who gets in it’s way.

If you list your book on Amazon, they take 55% of the suggested retail price. That is, by any standards, exorbitant. More than 50% of price goes to Amazon! And you pay for shipping. And you have to hassle with getting them products. And even if they order 25 books, you don’t get paid until months after they sell them.

I’m not complaining. But, overall, I’d rather deal with just about any partner rather than Amazon.

This sales tax move is simply a <b>ruse</b> to get out of the affiliate program and stop sharing even tiny bits of money with so-called partners.

In your present state of existence you will find the seeds of your future.

In your present success you will find the root of your demise.

Amazon’s demise has begun. They have been the number one, big, bad, pushy book seller for a long time. They killed Borders and they’re killing Barnes and Noble. But as the ground shifts into an online world they helped to build, I think you find Amazon losing to smaller, friendlier online stores.

I think a business model that treats authors fairly, treats partners fairly, and participates as a good citizen will do well. I don’t see that coming from Amazon. Walmart or Target might have a chance at it. In fact, Barnes and Noble might. And, of course, a newbie could spring forth and take over the world. Google?

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We sometimes forget that things can change very quickly. Ten years ago, Amazon needed an affiliate program because they were building a base and getting ready to conquer the world. Now they think they own it.

There was a time when no one could possibly dislodge Barnes and Noble or B. Dalton. (Who?)

Money changes behavior.

Of course I’m removing my affiliate links to Amazon, and my banner ads. But I’m also eliminating all links to Amazon. Why promote someone who treats me poorly?

I’m not really mad with Amazon since this has been coming for more than a year. But I am disappointed. And I’ve got my eyes out for a better partner who will treat everyone fairly — including the citizens of the U.S. States.