After years of operating a successful comparison shopping site in California, Nick Loper recently had to shut down his business and move to another state to start over. Why? Loper was one of the affiliate marketing victims of the online sales tax law that California passed earlier this summer.
Did California’s tax law impact you? Please share.
The law, which is often referred to as the “Amazon Tax Law,” requires online retailers to pay taxes on their affiliate advertising. Almost immediately after this law went into effect, online retailers, such as Amazon, cut ties with affiliate marketers in the state.
According to Loper, this action meant that a half dozen of his largest advertisers on ShoesRUs terminated their relationship with him, leaving him shy of 70 percent of his revenue.
“It was, essentially, out of business overnight,” he said.
The California law was intended to help the state with its struggling financial issues and to also reduce the competitive advantage that many brick and mortars believe online retailers have over them. Loper, however, does not think that either of these goals has been fulfilled.
“Neither of those groups are better off today than they were before the law passed,” he told us. “The state’s not getting any revenue and the playing field, per se, still has not been equalized.”
Loper also pointed out that he would have never thought such a law would be implemented in a state that is the home of so many tech companies and the Silicon Valley. But, since it was, he had no choice but to move from California to Nevada to start a new business.
His new site is a comparison shopping site for shoes called ShoeSniper and is similar to his previous site. He chose Nevada because it does not have an online sales tax. Fortunately for him, he has already regained nearly all of his former advertising relationships.
Interestingly, as the debate surrounding online sales tax debate continues, more states are considering taking actions similar to the law that California recently passed. What’s even more interesting is that Congress is contemplating action at a federal level. Senator Dick Durbin (D-IL), recently introduced the “Main Street Fairness Act,” which Amazon, incidentally, supports. The House has introduced a similar bill as well.
Would you like to see the online sales tax issues solved at a state level or federal level?