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Termination of Hawaii Affiliates Continue

Hawaii affiliates are being greeted with termination letters. In anticipation of the Governor signing (or failing to veto) the Internet Tax Law, HB 1405, merchants are beginning to remove affiliates in order to avoid a nexus. Unless vetoed, HB 1405 takes effect on Wednesday,  July 1. Affiliates from Hawaii have expressed feelings of despair, anger and shock.  Having been on the receiving end of termination letters from hundreds of merchants last year, New York affiliates know the feelings. I remember it as if it were yesterday

Termination letters have been sent to affiliates in Hawaii from Zappos, Amazon, Endless and several other smaller merchants. As affiliates begin to scramble trying to salvage what will remain of their business, I cannot help but think this is only the beginning.

Hundreds of letters will go out this week to thousands of affiliates in the states of Hawaii and  Rhode Island at the very least. North Carolina probably is not too far behind. In spite of all the warning signs I fear many are unprepared.

It is my hope that merchants make educated decisions. Take a moment to read the law, hire a sales tax attorney to get clarification and then make educated decisions as to whether to remove affiliates or not. Remember there is a sales threshold to be affected and there is the ability to rebut the presumption of nexus.  Examine if it would make sense to start collecting the sales tax. Afraid of losing customers over a sales tax? While I believe that it most likely doesn’t matter to the majority of shoppers, there are many things you can do to “make it up” to the customer. Offer them a $5 or $10 dollar coupon for their next purchase, give them free or upgraded shipping, or a small gift with your company logo.

It is my hope that affiliates take a positive proactive approach. Work together to find replacement merchants. Work together to contact merchants to keep lines of communication open. Explain that there are things they can do that will make it possible to keep working with you.

It is my hope that networks will assume their responsibility of ensuring that everyone is making informed and educated decisions. It is their responsibility to facilitate the recovery period.

It is my hope that we learned something from last year. I think we did, but the question is, did we learn enough?

{ 13 comments… add one }

  • Rick Wilson June 29, 2009, 3:13 pm

    NOT really surprised but this morning I received that termination email from Amazon Associates.

    The “clueless” lawmakers of Rhode Island must have alot of pain in their feet after shooting themselves in the foot. Less affiliates means the state collects less income taxes from them.

    Smaaaaarrrrrt …

    But you’re certainly correct … We need to move on as affiliates. Plenty of things to go after.

    Thanx for all the affiliate info you put out here on your blog! Very informative.

    Rick Wilson

  • Melanie June 29, 2009, 3:46 pm

    Thanks for stopping by Rick. I am glad to be able to provide information.

    As long as affiliates adjust their business and their approach, their business will survive. It is just going to be different. There are plenty of great merchants that can replace any terminating merchant. It’s just a matter of finding them.

    It’s sad and it’s a lot of work but it’s doable.

    Best of luck to you Rick and if you need anything just ask.

  • Erik Hom June 29, 2009, 5:51 pm

    I’d like to see some of these letters that the companies are writing.

  • Mitch June 29, 2009, 10:07 pm

    As you said, we New Yorkers went through it last year, and it still occurs from time to time. We just deal with it and find other stuff to market.

  • Clay Franklin June 29, 2009, 10:10 pm

    Looks like California may be next. There is a bill that if passed will put CA in the group of internet tax states.
    I enjoy selling Amazon products especially with the quick link feature on every page I browse. Who is your favorite Amazon replacement merchant?

  • Troy June 30, 2009, 4:46 am

    Here is what the Amazon letter said –

    We are writing from the Amazon Associates Program to notify you that your Associates account has been closed as of June 30, 2009. This is a direct result of the unconstitutional tax collection scheme passed by the Hawaii State Legislature with an effective date of July 1. As a result, we will no longer pay any referral fees for customers referred to Amazon.com or Endless.com after June 30.
    We were forced to take this unfortunate action in anticipation of actual enactment because of the uncertainty and timing of a veto, and the possibility that a veto could be overridden. The governor has until July 15 to veto the bill but, as indicated, the bill has an effective date of July 1.
    Please be assured that all qualifying referral fees earned prior to June 30, 2009 will be processed and paid in full in accordance with our regular referral fee schedule. Based on your account closure date of June 30, 2009, any final payments will be paid by September 1, 2009.

  • Geoff June 30, 2009, 7:55 am

    One has to wonder where it will all end. Is there a date when all bills have to be passed by to come into effect in a state?

  • Melanie June 30, 2009, 8:33 am

    Thanks for stopping by Mitch. That’s it exactly, deal with it and find new. Not easy and takes work but it’s what we have to do to stay in business.

    It is odd how we are still getting periodic termination letters, plus rejections. If only merchants would indicate NY affiliates are not allowed to participate; would certainly save us all time.

  • Melanie June 30, 2009, 8:43 am

    Yes California may not be far behind, it’s in the budget bill.

    With several thousand types of products I could not begin to tell you where to look. It will probably take many merchants to replace them. Start researching through the major networks (like ShareASale, GAN, Linkshare, CJ, Avantlink). I’d suggest looking at some smaller merchants and then if all else fails go to the larger “everything” stores (department stores, Walmarts and such). Also if stuck use some adsense to fill voids. That ensures your visitors will still be able to get what they want after visiting your sites.
    Once you get though initial recovery period, you can go looking for Indie programs and more merchants at networks. You can and will find quality replacement merchants, just won’t happen overnight.
    Thanks for stopping by Clay and good luck!

  • Melanie June 30, 2009, 8:48 am

    Hi Geoff. Each state has some guidelines as to when bills should be passed as part of the regular legislative sessions. The budget bill process is often afterwards and although it is also an ongoing process there are guidelines as to when budget bills must be passed. Of course that deadline can be adjusted. Emergency sessions can also be called. So there are guidelines but there are exceptions. Bills take effect when indicated in the actual bill so that varies too.

  • Melanie June 30, 2009, 9:03 am

    Thanks for posting a copy of the letter Troy.

  • c ford June 30, 2009, 4:34 pm

    “Explain that there are things they can do that will make it possible to keep working with you”

    Can you elaborate on the above? Thanks

  • Naples Property Management July 20, 2012, 1:40 pm

    Very interesting subject, thank you for posting.

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