Forbes on the Advertising Tax

I heard about an article in Forbes on Wicked Fire a couple days ago and was curious to read the piece. But I was surprised by the position of the article, “Taxing a Virtual Presence,” by Lee Gomes.

First off, the article didn’t include any perspective from an affiliate marketer, and the view of affiliate marketers was rather narrow and uninformed.

Affiliate marketing is the practice by which a Web retailer pays a commission to smaller sites that send it business. When bloggers recommend a book to their readers and then provide a link to the volume on, say, Amazon, they become affiliate marketers and thereby receive a cut of the sales–up to 15%.

Hover over one of these recommendation links, then look at the long URL at the bottom left of your browser. The seemingly random string of numbers and letters instructs Amazon’s computer, telling it to credit the appropriate account if a sale gets made.

It’s a win for all concerned. The Amazons of the world get customers without incurring marketing expenses; small Web sites can pick up some pocket change to help defray expenses. (In sleazier regions of the Web, like gambling and porn, the amounts offered for referred business are substantial. That’s why a large percentage of all spam e-mails are from aspiring affiliate marketers.)

I would imagine Amazon considers the affiliate commissions to be marketing expenses, but that’s not a big deal.

Rather, I take umbrage at the opinion that “a large percentage of all spam e-mails are from aspiring affiliate marketers” – if this is, indeed, true, then how about a sourced statistic?

And the description of affiliate marketing suggests that there is mere “pocket change” to be made. Maybe, if he bothered to speak to an affiliate or three, he would have a better sense on the earning potential, as well as the fact that big commissions are not only available in gambling and porn.

But I suppose I should not have expected a particularly enlightened and even-handed article, based on the opener…

Internet users don’t like paying for news or music. Why should they want to pay sales tax?

Again with the broad brush from Lee Gomes. I don’t pay for news online, because there are quality, free news sources online. But I do subscribe to two daily newspapers. And I have always paid for my music online.

Gomes even admits deep in the article that “Constitutional law holds that an online retailer such as Amazon can’t be required to collect sales tax in a state unless it has some sort of connection to the state, called a ‘nexus.’” In one of his rare citations, he refers to Scripto v. Carson, 362 U.S. 207 (1960).

He might want to also reference Quill Corp. v. North Dakota, 504 U.S. 298 (1992).

Oh yeah, and Mr. Gomes – you are way, way off with your guesstimate (which should have been indicated as such, and not passed as a fact) on the size of the Amazon Affiliate Program when you say Amazon “has tens of thousands of them” in reference to their affiliates.

FYI – Amazon has hundreds of thousands of affiliates.

Read the complete article at http://www.forbes.com/forbes/2009/0525/042-internet-taxation-software-digital-tools.html.