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Amazon Terminates Colorado Affiliates, Joins Growing List of Advertisers

Mar 8, 2010
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Among the so-called Amazon Taxes Colorado HB 1193 is unique. Signed into law by Governor Bill Ritter on February 25th the legislation went into effect on March 1st and is heralded as a landmark bill, the first of its kind to put teeth behinds its attempt to collect sales tax. It requires all online retailers who do not collect sales tax to put a notice in the Colorado customer’s invoice notifying them they are by law obligated to pay sales tax in the state for their purchase. Beyond that it further requires retailers to submit a yearly list of customers and purchasing data to support Colorado’s enforcement ability.

The law also differs from its Amazon Tax brethren in that it purposefully, and with the support of large affiliates like ShopAtHome, attempted to spare Colorado affiliates from the fate they suffered in other states where similar laws have passed. For the Performance Marketing Association the removal of affiliate focused language was seen as a victory.

Unfortunately the attempt protect affiliates failed.

Amazon, who provided lobbyists during the fight against HB 1193, served termination notices over the weekend to thousands of Colorado affiliates saying:

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.

Amazon is not alone in this stance. A handful of other companies including Oriental Trading Company, Hammacher Schlemmer, Terry’s Village and GiftBaskets.com have terminated affiliate relationships in the state. With Amazon’s announcement over the weekend many other are expected to follow suit including Overstock.

Many members of the PMA feel that such actions are due to advertisers who have not taken the time to familiarize themselves with the law’s new language. In Amazon’s case, Amazon does say it will continue to sell to Colorado residents, whether they will comply with providing lists of its customers who are Colorado residents to help with enforcement has yet to be seen. Knowing Amazon’s past behavior it is doubtful and a legal challenge against this legislation won’t be surprising.

About Angel Djambazov

Born in Bulgaria, Angel Djambazov has spent his professional career in the fields of journalism and online marketing. In his journalistic career he worked as an editor on several newspapers and was the founding Editor-in-Chief of Wyoming Homes and Living Magazine. Later his career path led to online marketing where while working at OnlineShoes he earned the Affiliate Manager of the Year (2006) award at the Affiliate Summit, and In-house Manager of the Year (2006) award by ABestWeb.

For four years Angel served as OPM for Jones Soda for which he won his second Affiliate Manger of the Year (2009) award at Affiliate Summit.

Currently Angel serves as OPM for KEEN Footwear and MedicalRecords.com. His former clients include: Dell, Real Networks, Jones Soda, Intelius, Graphicly, Chrome Bags, Onlineshoes.com, Vitamin Angels, The Safecig, and Bag Borrow or Steal.

Angel is the Editor-in-Chief and Co-Publisher for ReveNews.com and ReveNews.org.

Angel lives north of Seattle, spending his free time reading up on obscure scientific references made by his wife MGX, while keeping up with a horde of cats and a library of books.

You can find Angel on Twitter @djambazov.

Filed under: Affiliate Marketing + Legal Issues + News + Performance Marketing + Taxes
  • Chris

    Yeah, got the same email this morning in my Inbox. This sucks big time. But with so many initiatives going on in other states at the moment as well, affiliates better start fighting back before it is too late like for us in Colorado.

  • http://bblmedia.com Franklin Banker

    Where I am somewhat confused is that they are openly saying they will continue to sell in Colorado through out of state affiliate websites, and other channels, while still finding it necessary to terminate us Colorado affiliates.

    This is very contradictory and seems to be a punitive action against Colorado affiliates who are not focusing their efforts only in Colorado, but across all markets in the US and abroad.

    Why fire the affiliates?

    I can only guess that they are doing this to get us back to the Capital to try to get the bill repealed instead of mounting their own legal challenge.

    After all, the new bill HB10-1193 now has no mention of affiliates in it at all. Why terminate affiliates at all? Under the previous model in New York, Rhode Island and North Carolina the term "affiliate" was in the bill, making it a bit more understandable.

    The Colorado bill does not mention affiliates

    The issue is one of legality and compliance, and no longer focuses on affiliates due to the rewrite of the bill. There is absolutely no reason to fire the affiliates now, so why do it?

    Maybe this is cheaper for them than mounting a legal challenge now. Perhaps they want to see if we can get the bill repealed?

  • http://www.revenews.com Angel Djambazov

    Hi Franklin,

    If I were to speculate, I would guess that Amazon's reasoning for terminating affiliate relationships is two-fold:

    a) as Melanie Seery from Affiliate Advocacy, who has an excellent write up as to "why" here, has pointed out Amazon has always said it would terminate affiliates in any state passing legislation they felt was unconstitutional. The constitutionality of this law is questionable at best so Amazon is keeping its word;

    b) if Amazon should challenge such a law, especially if Colorado attempts to force Amazon to reveal its customer list, having affiliate ties in the state could be used as leverage against Amazon during any legal battle. It would seem that someone in Amazon's legal felt those ties would become a liability in other efforts.

    As I've said previously I don't like the idea of affiliates being used as negotiation chips but those are the reasons I can guess at currently. It will be interesting to see if Amazon makes any kind of official response.

  • http://bblmedia.com Franklin Banker

    I see that reasoning of course, and maybe they are preparing for the legal battle at year's end when they refuse to provide the list of customers and what they have purchased.

    It is sad to see such disloyalty to hard working associates. I am fortunate in that I have no big stake in Amazon, but if this trickles down to my merchants then I will be hurt.

    I met several good affiliates during the fight in Colorado who do make most of their incomes through Amazon, so I know they are much more upset than I am today.

    I pray these merchants I do business with will have more integrity than Amazon. We have seen this follow the leader mentality before in NY. I guess it all depends on factors beyond our control.

    I may be moving to Utah after all :)

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  • http://AffiliateAdvocacy.com Melanie Seery

    Thanks for the mention Angel.

    This new law in Colorado is very different from the ones passed in New York, North Carolina and Rhode Island. The actions a merchant may have taken in those other 3 states will probably not work in Colorado. Terminations will have no impact on whether there is a need to comply.

    I'll repeat my advice to merchants – seek qualified counsel before taking any action, and don't simply follow any other merchant's actions. No one can know the whole story behind the decision. What is right for one business is not always right for another. What does this mean for merchants? This may mean retaining a lawyer or asking your qualified accountant and putting your business in your own hands.

    We'll all continue to work on this issue as we have done since 2008. Hopefully we are learning from experiences.

    Preparation and education is the key for every Affiliate and Merchant.

  • http://bblmedia.com Franklin Banker

    While all this moves forward from state to state, we are all aware that the original bill in New York is the subject of litigation which is ongoing and in progress currently.

    No one can guess what will happen eventually, but it is at least a reasonable hope of mine that the New York "Amazon Tax" bill with the ruling of "affiliate nexus" will be found unconstitutional and made null and void by the US Supreme Court. I have no legal experience or special knowledge about this, but I can pray, and that is what I am praying for.

    In the meantime states are doing big damage to our business model with various bills aimed at collecting sales tax from online purchases. I wonder if any of you know the progress of the litigation? I last heard it was in the appellate courts in New York.

  • http://www.affiliatefairplay.com Kellie Stevens

    When I read the final bill, I thought "ha..Amazon should show them and announce they were going to stop selling in CO". How long would it take if consumers could no longer buy from just a couple of online merchants? I'd give it a week before CO legislators were overwhelmed with consumer complaints. Unfortunately, Amazon took a road that is probably less costly for them.

    I'd also speculate that Amazon's move to drop affiliates in CO might have something to do with their appeal of the NY Amazon Tax, which will most likely end up at the Supreme Court. I have to think since that is the ultimate end game, it is playing a role in what Amazon does in every state.

    Politics can get nasty. This is the type of tangential fallout (innocents getting hurt) that has made me opposed to government intervention/regulation witin our industry (at least as little as possible).

    I don't see merchants turning over that kind of data on customers to any state if they don't have to. And while the law supposedly "levels the playing field" between online & brick and mortar stores, it seems more burdensome for online retailers.

    Although I haven't seen it mentioned, I wonder about privacy issues with this CO law. Not so much the notice on the invoice, but the yearly reporting. It's along the same lines of an employer having to send out W-2's, 1099's etc. But you *know* that is getting sent as an employee or contractor. A consumer having info reported to the tax collector because they made a purcahse at a store??? I can see why some merchants are running away from that as well.

    And unfortunately, the original bill was tied to affiliates. A response I saw from Amazon made it clear Amazon felt this bill was an attempt to force merchants into ultimately collecting the tax. The issue of an affiliate nexus may not be perceived as completely dead by some (my guess).

    If retailers are reacting this way to the CO law, can you imagine what can of fallout there may be if FL passses what they want to?

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