If you participate in affiliate programs and your account is associated with a California address or bank account, as of June 29, 2011 you probably had many of your affiliate contracts canceled.
Because on June 29, 2011, California Governor Jerry Brown signed into law a bill (California AB 28 Sales Tax) requiring that sales tax be collected and paid by businesses that sell items to California residents and business owners over the Internet.
Affiliate programs from Amazon to dozens on Linkshare are rescinding affiliate privileges to every single California website owner. It was reported that Amazon alone canceled 25,000 affiliate contracts in California.
After the shock of losing all your affiliate income (literally overnight) has worn off, take proactive steps as soon as possible.
Accept Barns and Noble's Invitation To Partner With Them
Only a day after the new Internet Sales Tax Law took effect, Barns and Nobel began sending emails out to former Amazon affiliates in California inviting all Californians to partner with them instead. The initial offering on all sales from books to DVDs to children's games and toys is a generous 6% sales commission.
Personal Affiliate Accounts Tied to Social Security Number
If you have a trusted family member or friend in another state, switch the account over to them. The key to remember is that if you allow someone else in another state to take over your account, they will be collecting all the proceeds from your affiliate income in their name and social security number, and they may have to pay income and sales tax on the earnings.
Pros: You may be able to keep the existing ads already on your website and will suffer less income loss as you scramble to find new ways to replace lost income.
Cons: If they pay out the money to you, you may also be liable for federal income and state taxes, so the income is essentially double taxed. Anyone who pays you more than $500 in a single year is generally required to complete a Form 1090. Also, there is the risk of straining a relationship if the family member or friend does not share the earnings. You may also have to pay a monthly banking fee to maintain the account.
Open a New "Office" In Another State
If you live near the border of another state, or have a business partner in another state, open a second business bank account there. You will need to obtain a business license in the new state and may be subject to paying state sales tax as well. When setting up a second business bank account, use your business' tax ID number (get one if you do not have one) or you own social security number and make sure you have signature authority on the account.
Pros:: Your business expands to multiple states, which may allow you more exposure in search engines since you can list multiple addresses. You also may be able to keep your existing ads on your website if the affiliate account can be updated to reflect a new state and bank location.
Cons: Again, you are required to trust someone else with at least part of your income and may be subject to paying double taxes, and whoever shares signature authority may have access to all funds in the account. You may also have to pay monthly fees to maintain the account.
Exploit Other Ways to Monetize Your Website
Switch to other programs that are not affected by the new California Internet Sales Tax Law, such as Google AdSense.
Sell ad space on your website to local businesses, or through services such as. The key to selling and making money from directly selling ad space is to have a high-ranking website, with good traffic. The more powerful your website presence, the more money you can charge.
Take Advantage of "Skip Monthly Payment" Credit Card Programs
If you pay a fee to your credit card company that protects you against loss of income, you might be able to skip credit card payments based on losing your job.
If you are not otherwise employed, having all your affiliate contracts canceled is a loss of your business income. Be sure to keep records of all your cancelation notices to prove to your credit card company that you "lost" your job.
Rethink Your Business Model
If you have already been running a website to earn income from affiliate programs, you probably already know how to create and maintain a website that can make money. Take advantage of your skills and a hot new business market -- creating and selling "turn-key" domains.
Put your skills and knowledge to good use and create affiliate-ready websites.
Sell Your WebsiteYour website may be a labor of love, but if it stops producing income, consider selling it. If it made good money for you, it can make good money for someone in another state where internet sales tax laws do not apply. Tips on Selling Your Website Without Getting Ripped Off If you do decide to sell your website, it is important that you continue to maintain it so that your traffic continues to grow. Even if you are not making affiliate income, it will sell for a higher price if you continue to keep it maintained.
Sell Ad Space
Unfortunately, advertisers are pickier about traffic and audience than affiliate programs. Still, try adding a page to your website with your advertising rates. A few good ads, can carry you until you can figure out what to do about the lost income from affiliate programs.
There is nothing you can do by sitting and stewing. The sooner you create a new business plan, model, or website, the sooner you can start to recover from your losses. If it makes you feel better, write to Governor Brown and share your thoughts. But after the vent, it is time to pick up the pieces.
Governor Jerry Brown
c/o State Capitol, Suite 1173
Sacramento, CA 95814
Phone: (916) 445-2841 | Fax: (916) 558-3160
Email Jerry Brown through the governor's website: http://gov.ca.gov/m_contact.php