As a resident of the state of North Carolina, I was troubled to hear the news last week that my Amazon Associates account had been terminated. Amazon has officially terminated all affiliate accounts for members living in NC because of a proposed affiliate tax in the state’s budget. As I am currently working to build many passive income streams through affiliate marketing, I couldn’t help but feel frustrated and angry over this proposed tax by my state.
All politics aside over the fight between Amazon and the state of North Carolina, there are many state residents who are impacted by this proposed tax. Anyone living here who was relying on income solely from Amazon has seen their hard work and income completely wiped out. While there are a few things state residents can do to help fight against proposed laws like this, such as petitioning, it is still very hard to control legislation and taxes in one’s favor.
The one bright side in my case is that my earnings from Amazon Associates were very small. However, if other affiliate companies follow Amazon’s lead, then I will be affected more by the affiliate tax. Will I be giving up on building my passive income streams? No! Instead of getting down and giving up, I realize that I need to press on.
Here are 3 things I have learned from the proposed affiliate tax by the state of North Carolina.
1 – Diversify
I can’t say it enough, but everyone should have a diversified set of income streams that they can rely upon for money. You shouldn’t rely solely on income from you or your spouse’s job alone to pay your bills. If you lose your job, then you don’t have any income sources to fall back on to make your monthly payments.
Just as you shouldn’t rely for income on a job, the same can be said for creating passive income. Relying on affiliate marketing, for example, as your only passive income source increases your risks of losing out on income. Affiliate marketers in North Carolina who relied only on Amazon as their income source are now finding this out the hard way.
2 – Adapt
Having the ability to adapt to changing economic climates is important for businesses and entrepreneurs. While the proposed affiliate tax for NC residents is very hard to cope with, I am not giving up. Sure, using the Amazon Affiliates program had the potential to be an incredible passive income stream for me. Unfortunately, it doesn’t appear that I will be able to use that tool for creating passive income streams. As a result, I will be searching hard for new ways to replace this source.
I personally feel that my business and passive income streams will become stronger over the long run as a result of this tax. If for some reason, NC decides to drop the affiliate tax from their budget – then great. If the tax goes through, then I will be sure to learn from this and move on. Either way, I plan to adapt to this setback and become stronger as a result.
3 – Flexibility
One of the biggest issues I am dealing with as a result of losing my Amazon Associates account is the hundreds of affiliate links that I have published through various sources. Most of my eHow articles contain direct affiliate links for products from Amazon. The amount of time that will be involved cleaning these links up will be significant.
Instead of simply placing affiliate links directly into eHow and other articles, I should have built these links to be more flexible. There are some tricks that I could have used that would have helped me replace these broken links. I will be highlighting these tricks in an upcoming post here on PFI.
Final Thoughts
Chances are good that the state of North Carolina will approve the affiliate tax as part of the proposed budget. There is also a good chance that other affiliate retailers will follow close behind Amazon’s lead and shut down accounts. I actually received an email from Commission Junction notifying me of the proposed tax and ways to fight it. While they didn’t specifically state my account would be terminated – it wouldn’t surprise me if it was.
Not a resident of North Carolina? You may not be completely safe as there are a few other states proposing similar affiliate taxes, so be sure to check up on what your state is up to.
Have you been impacted by the proposed North Carolina affiliate tax? What about from another state?
Do you live in North Carolina and oppose the affiliate tax? Please go sign the petition North Carolina Affiliate Tax!
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Wow! That is just plain brutal. Since I live in South Carolina, I hope that our state representatives do not try and copy your guys (like we do everything else).
If your affiliate income is large enough, you could always open a single member LLC in another state not impacted by these law changes. That would, however, require you to file another tax return at the end of the year.
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passivefamilyincome Reply:
June 30th, 2009 at 10:56 pm
@Dusty – I think I read the SC voted their bill down so I think you are safe. I am considering setting up a LLC in another state as you suggested. I am waiting to see a little more how things play out before making a decision.
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If you write a letter to your state legislators, don’t forget to point out that your affiliate links are advertising – such as links in the local paper. The state isn’t planning to double-tax advertising in local papers, do they? Those ads bring dollars to the state. First they are taxed as income to the newspaper, and then the money goes to payrolls and otherwise supports the local economy.
But unlike newspapers, affiliates are bringing dollars IN to the state from all over the country. So all they are doing with this law is removing income FROM the state.
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passivefamilyincome Reply:
June 30th, 2009 at 10:59 pm
@Camille – Unfortunately when Amazon drops the accounts, there are not many choices other than complaining to the state government. Thanks for stopping by!
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Keep us posted on how this plays out in the end. I lived in NC for a decade & hate to hear about this tax. That’s something everyone in Internet/Affiliate Marketing may need to investigate before moving to another state. (wonder if all the Amway/Quixtar people in NC would get taxed on their biz under this?)
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That really is crappy about the affiliate tax, luckily there is nothing like that here though of course I have my own problems being in the UK (such as horrible exchange rates and payment methods, or some options not available to you). Having programs just cut off from you though has to be the worst. I agree though that we can’t put all our eggs in one basket!
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you could incorporate in NV, and have a mailbox there. this would help you get around being dropped by amazon.
Living Off Dividends & Passive Income’s last blog post..$7,353.84 In Online Income!
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There is now new North Carolina affiliate tax. Do some research next time before you write a post. This tax is a state use tax that residents paid voluntary when they filed their state tax. Since residents did not pay it like they should. The State wants amazon to collect it at the time of transaction.
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