Yesterday Illinois Governor Quinn signed a new law that broadens sales tax on online purchases. This new law requires online merchants to collect sales tax on purchases made through business partners based in Illinois. In response, for Illinois-based businesses, Amazon.com has pulled the plug on its Amazon Associates Program, which according to the Wall Street Journal, affects 9,000 websites that refer shoppers to Amazon's site and receive a commission on the purchases.
Additionally, the Performance Marketing Association revealed that the Illinois affiliates generated ad revenue of $611 million in 2009 and $18 million in tax revenue. It's estimated that Illinois will lose up to 30% of the tax revenue, as firms lose business, cut jobs or move out of state.
Amazon.com sent all Illinois-based Associate Program members the following Notice of Contract Termination and will close such accounts as of April 15, 2011.
---------- E-mail message ----------
From: Amazon.com Associates Program
Date: Thu, Mar 10, 2011 at 5:32 PM
Subject: Notice of Contract Termination Due to New Illinois Law
For well over a decade, the Amazon Associates Program has worked with thousands of Illinois residents. Unfortunately, a new state tax law signed by Governor Quinn compels us to terminate this program for Illinois-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by Illinois-based affiliates like you - even if those retailers have no physical presence in the state.
We had opposed this new tax law because it is unconstitutional and counterproductive. It was supported by national retailing chains, most of which are based outside Illinois, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that its enactment forces this action.
As a result of the new law, contracts with all Illinois affiliates of the Amazon Associates Program will be terminated and those Illinois residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, or SmallParts.com. Please be assured that all qualifying advertising fees earned prior to April 15, 2011 will be processed and paid in full in accordance with the regular payment schedule. Based on your account closure date of April 15, 2011, any final payments will be paid by July 1, 2011.
You are receiving this email because our records indicate that you are a resident of Illinois. If you are not currently a permanent resident of Illinois, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state after April 15, please contact us for reinstatement into the Amazon Associates Program.
To be clear, this development will only impact our ability to continue the Associates Program in Illinois, and will not affect the ability of Illinois residents to purchase online at www.amazon.com from Amazon’s retail business.
We have enjoyed working with you and other Illinois-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to Illinois residents.
The Amazon Associates Team
This is among the many taxes that they plan to tax on people and in the free space called the internet.
Many people use the power of the internet to stay away from taxes. However, more and more people are doing this strategy. This has brought the idea to the government regarding the possibility of adding taxes on online businesses. I am pretty sure that this will be implemented on all businesses both small and big soon.
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