Woke up this morning to a letter from Amazon.com:
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.
What does this mean for Coverville?
It means that the Amazon links I provide to conveniently purchase the songs you hear on Coverville will no longer provide any income for me. This is huge, as I’d receive a monthly gift certificate form Amazon, that I’d use for the entire month to purchase albums and songs for show content. And it does take a bit of time during the production of each show to produce those links.
That said, as the links are a convenience for the listener, and still provide a way for you to enjoy and discover more music from the artists you hear on the show, I will continue to produce the links for every episode, and am still in development to add links to all the songs you’ll find in the searchable Cover Song Database.
I’ve sent letters to Colorado government, and Bill Ritter, and will keep my hopes up that this will change. In the meantime, if you have no preference between the two pay-by-the-song services, I urge you to use the (DRM-free!) iTunes links I provide.
"no other state has similar rules." I don't know why they said that. Amazon had to close my associate account (in North Carolina ) for reasons of similar if not identical bad laws in our state a year or so ago.
As much as I have liked doing business with Amazon… A boycott may also be in order. I don't like the law either… Do you happen to have a template for the letters you have sent?
I'm afraid I didn't save them. I used the "contact" field on their respective sites to send the message, and basically, I explained how this decision greatly affects my bottom line as a Colorado Small Business.
Basically, the law says that Amazon has to collect tax for Colorado whenever a Colorado-based affiliate sends business their way. It's a roundabout way to designate 'sales made in Colorado' and theoretically increase sales tax revenue. (And if I understand it correctly, it only affects out-of-state people who follow your affiliate links, just to make the tax even harder to determine and collect.) Amazon won't be the only retailer that eliminates its affiliates, unfortunately – this will probably kill a lot of online businesses in Colorado that depend on affiliate revenue.
(And, as stupidly as this legislation was crafted, there is actually a reason for it. Since Amazon does *not* have to collect tax on Colorado residents who follow affiliate links, the law gets around the idiotic Tabor Amendment, which is absolutely strangling us.)
This really bites. I prefer Amazon because I like to get the used CD's that the songs appear on or even sometimes a new CD that i have heard on your show. iTunes is…OK, but I prefer physical media for archival purposes. I guess if it is just one song I can buy i through iTunes and if I want a CD still get it through Amazon.
I don't know how much this is costing you in revenue, but I would gladly and voluntarily chip in a 5 buck a month fee similar to the way Lyrics undercover works. You don't have to make it premium or offer a product, just set it up so it remembers to debit the donation. If you put up a link. I would happily pay it as I am sure others would. This might offset the loss.
What a bummer Brian.
For my sins I am an indirect tax specialist, albeit in the UK where we operate using a NATIONAL sales tax (VAT) based on a pretty common set of rules throughout Europe. Out of interest, I had a quick look at this bill and it just seems crazy, as it deems Amazon to have a business presence in Colorado just because they pay you a few bucks as an affiliate. In other words, your office is deemed to be a business premises for Amazon. Faced with this moratorium, and looking at USA businesses like Apple selling electronically into Europe, Europe introduced a requirement for these businesses to pay tax in Europe if they sell to consumers here, but this is because we have one system, not 50.
But really, part of the issue, and one that the USA HAS to face up to soon, is that the current system of an effective moratorium on taxation for internet sales is not sustainable, especially considering the HUGE debts the USA has, but the approach of Colorado seems ill considered. Really, the better approach would be, as Obama is pressing for, a national sales tax or VAT to replace the STATE sales taxes to benefit the national economy and to provide a more level playing field for regular retailers who must be really sufffering considering the huge volume in internet sales.
I did some work recently with some sales tax colleagues in the USA and, from what I can see, the rules are plain crazy, with some states seemingly randomly exempting some events (such as football games) from sales tax but then imposing tax the next night when a pop concert plays at the same event.
How if one of your podcasting buddies outside of Colarado had the affiliate account?