Amazon Associates Program and interstate commerce

In my CIS 152 course, we recently discussed some of the ways a Web site can make money. We discussed "affiliate marketing", where one site can advertise products on another person's site. The example we discussed was Amazon Associates.

Amazon's program is relatively successful, as far as these things go. For example, I as a person with a Web site, can advertise their products like this:



...and if you were to click on that link and buy something I'd get a (small) percentage of the proceeds.

We also talked about the oddities of interstate commerce, such as the legal mess that is wine.com's shipping policies. There are many different laws in different states, and it's tough to keep track of. When New York changed laws to require all residents to pay sales tax, though traditionally you only had to pay sales tax to companies that had a presence in your state. I knew other states would follow suit. North Carolina decided to do something similar, and it's affected the Amazon Associates program.

Any people living in North Carolina are not eligible for this program now, as of June 2009. The laws read that you couldn't tax any company that doesn't have a physical presence in your state. North Carolina decided that if there are Amazon Associates in North Carolina, that qualifies as a "physical presence", so they wanted Amazon to start collecting sales tax on all purchases.

Amazon was not interested in collecting sales tax on all purchases in North Carolina, so they decided not even to bother with North Carolina. Now, since there are no Amazon Associates in North Carolina, there is no physical presence, so there is no reason to collect sales tax on purchases made in North Carolina.

Obviously, Amazon hopes people are outraged enough to run to their Congressmen and have the law changed...but at the moment, North Carolina is out.

Following this, Amazon also made this program unavailable to residents of Rhode Island, also in June 2009, for the same reasons.

I think eventually laws will be amended to tax all Internet sales, but as we've discussed in my course, the laws are almost always behind the technology. The interstate commerce law was first passed in the 1960's, and this is what happens when you try to apply a law written 50 years ago to technology.