Colorado just killed thousands of small businesses whose revenues are based on affiliate sales. They follow on the tail 3 other states with similar laws in place already, and 14 more states nipping at their heels. Here’s why, whether you are an affiliate, or you run an affiliate program, you need to know how this rabid pack of looters can do serious damage to your business, maybe even kill it all together.

Amazon first to fight back . . .

When Colorado passed this new onerous tax law, they forced Amazon’s hand. With one of the world’s largest affiliate programs, Amazon had learned from their experience with New York state when NY passed an Affiliate Nexus Tax. Amazon immediately notified every affiliate in Colorado that they were canceling their affiliate referral program in the state.

Basically they called Colorado’s bluff (CO didn’t think they would ever do what they did) and in the process they took a stand for us all.

You see, New York, along with North Carolina and Rhode Island have enacted laws saying that if a retailer runs an affiliate program with referral payments, that’s enough to trigger tax collection requirements. It has to do with “nexus”, which we’ll get to in a minute.

California, Illinois, Iowa, Maryland, New Mexico, Vermont, and Virginia are among those states with similar measures currently pending; in Virginia, one chamber of the state legislature has approved the bill.

The law is called the Affiliate Nexus Tax, AKA the “Amazon Tax” for Amazon’s ongoing legal battle with New York state on the unconstitutionality of the law. It’s the latest in a series of efforts to increase taxes by eliminating the long-standing “physical presence” standard and replace it with a nebulous, arbitrary standard of “economic presence.” Physical vs. economic presence is HUGE when it comes to nexus.

But the fact that Amazon has deep pockets and is able to fight this is a help to us all — affiliates and business owners with affiliate programs alike.

The deadly danger of the Amazon Tax & Affiliate Nexus

Aside from the unconstitutionality of these laws, the ass-backward logic of raising taxes on the businesses on whom the recovery depends, and the over-reaching of states beyond their borders; the most pressing concern you need to have is the language these new tax bills use.

Common language from the bills includes:

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