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.
{ 6 comments }
His article is listed under “Digital Tools”.
After reading his article, I can easily say that Lee Gomes is officially a Digital Tool.
’nuff said.
Read Gomes article — Mehh!
As a so called “Super affiliate” I do feel fairly offended at the way that he worded his article about affiliates.
He fails to realize that many affiliates pay for their traffic, which is essentially why this tax is so bad.
I’m sure hoping the affiliate community comes out in force to stop this.
There is a very good reason why Google wants to put servers on the moon.
The more things change, the more Neil Stephenson looks like a prophet.
~~~~~~
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.’”
~~~~~~
I hope people understand that the Constitution restricts one state from imposing unfair taxes on another state (or on businesses in another state)… it’s important to distinguish the details. If the two states signed a pact, they surely could require Amazon to collect sales tax, regardless of nexus. Nexus, from the Quill case, gives a state qualifying conditions whereby they can force an out of state company to collect and remit sales tax, because that company has a presence.
The whole system is broken by it’s age, today, state borders mean nothing to consumer commerce. As an affiliate, I could live in New York and operate a website hosted in Illinois, but whose content and theme and audience is completely centered on living in Sacremento, CA… so while I may live in NY, I am selling to people in California. If I sell tshirts from a company in Georgia to my SacrementoBeGreat website audience, these new state laws would allow NY to force the Georgia tshirt company to collect sales tax on all tshirts they SELL IN NEW YORK (because I constitute a NY nexus) even though the shirts I sell go from the Georgia factory straight to my consumers in California… they never even go into New York. And the commerce I’m getting paid a commission for doesn’t even take place in New York – I’m an affiliate and the shopping cart is on a website that the Georgia tshirt company has somewhere, perhaps in Missouri.
The concept of a Nexus worked great with the Fuller Brushman, but today, one “sales person” can operate in all 50 states simultaneously, being virtually present in them all, and physically present in none – yeah, keep destroying my business with stupid tax laws and i’ll move to Belize and be nobody’s Nexus!
Shawn, well said! It’s misinformed folks like this guy that give affiliate marketing a bad name. If he had done just a little bit of research, he would have found the errors in his statements.
Comments on this entry are closed.
{ 12 trackbacks }