Friday, April 15, 2011

Arkansas Amazon Tax Law

Update: The Arkansas Amazon Tax Law is Arkansas Act 1001 of 2011.

In April 2011, Arkansas became the 5th state to pass into law an "Amazon Tax". At the time, I tweeted to Roby Brock, host of Talk Business, that Amazon would likely respond by ending its famed associate program for Arkansas enrollees. Well, Amazon was not the first to respond. Overstock.com was and predictably ended its associate program for Arkansas enrollees.

Jason Tolbert, editor of The Tolbert Report, tweeted to Roby; "I wonder how Wal-Mart's offer compares to lost revenue $ - inc. or dec.?" Roby replied to Jason; "I bet @TimothyLeeAR can answer."

Major Affiliate Programs

AR nexus--YYY


Overstock.com isn't really "hurt" by dropping its affiliates in Arkansas. Arkansas affiliates are "hurt" by the loss of an income stream, as is the State of Arkansas which loses taxable income. Advantage Overstock.

Cutoff affiliates will likely construct a payout table and determine which affiliate program to switch into. Knowing Amazon's past decisions to drop states passing "Amazon Laws", we suspect most will gravitate towards BN.com which has an Arkansas bricks and mortar nexus and offers a steady 6% commission. The exceptions will be those few merchants who market products that generate a 7% commission.

In addition to the monetary incentive to switch there is also a labor incentive not to switch. Every single affiliate link they have created on blogs, social media, etc. will require editing to change the URL to the new affiliate program. Arkansas affiliates receive no payment for their labors in editing what are potentially hundreds of URLs by hand. While many may decide to switch, many will decide its not worth the trouble. Of those that decide to switch over, few will be willing to switch a second time should their newly chosen affiliate program also decide to boycott Arkansas.

The deciding factor will be "How badly does my family need this income?" Those merchants hurting in the current economy will likely "suck it up" and make the switch. Those less reliant on affiliate income are most likely to "toss in the towel" as we did when Books.com was bought out by a larger company.


The new Arkansas Law is likely unconstitutional [Quill Corp. v. North Dakota (91-0194), 504 U.S. 298 (1992)] and will eventually be challenged through the Arkansas and federal judicial systems. There is likely to be little increase in state revenue and that revenue will likely be offset by increased legal costs of defending the Arkansas law. The end result is likely a net financial loss to the state and people of Arkansas.

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