with Mir Kamin
I'm a freelance writer and mother of two working from home, which theoretically means I can set my own schedule so as to best accommodate my family. In reality, "flexible hours" often equals "working too much." Yes, I'm my own boss; no, that doesn't mean life is easy. It's hard to leave the office when you live there. But I love what I do and feel very lucky. And not just because I get paid to work in my pajamas.
To learn more about Mir, check out her profile on Work It, Mom! or visit her blog at http://www.wouldashoulda.com/
One of the questions I get asked a lot is about diversifying—how, as a freelancer writer, can you fill your days and your workload with enough different kinds of gigs to make sure that a downturn in one area doesn’t wipe out your entire client base?
Part of this is achieved through my favorite balancing act, fun vs. profit. There are jobs that don’t pay particularly well but I really enjoy, and then there are jobs that pay gobs of money but are boring. (Most jobs fall somewhere in the middle, but I confess to always having a few gigs out on the edges, there.) Balance is the key, obviously. And of course I thought I was extra-brilliant when I started my bargain shopping website because it’s a subject about which I’m passionate, but represented my entry into a new earning model: Affiliate revenue.
Most of the links to items I post on Want Not are affiliate links, meaning that they are tracked and I get a commission on purchases made through them. Voila, instant revenue stream! Of course, as online shopping has increased in popularity, so has the government’s desire to make sure they get their cut. And that’s how affiliate tax nexus laws began.
It’s an oldie but a goodie, this summary of the laws by the Performance Marketing Association, which includes the following:
The crux of the bills is predicated on the idea that affiliates are extension of a merchant’s sales force and thus constitute nexus for that merchant. Not only is that premise absolute wrong, it discriminates against independent small businesses and entrepreneurs using advertising model not a sales model to generate their income. Affiliates (also known as publishers) are part of an online advertising program, in which the retailers advertising partners are paid when a specific action is completed. This model is similar to traditional display advertising in print publications or broadcast media with one key difference – how payments for advertisement are determined. Based on that truth – affiliates are simply another advertising vehicle for merchants and online merchants would not have a sales presence (or nexus) in states, and should not be required to charge sales tax.
That’s a pretty good summation of why states started trying to tax any resident posting affiliate links on their websites. It’s a short-sighted attempt to get more money. As a more recent piece on these laws explains, though, such laws being passed in several states had the complete opposite effect—many Internet retailers simply kicked all affiliates in the affected states out of their programs, for a loss of income to those affiliates estimated to be in the 30% range, which they then were no longer paying income tax on. The end result was less money to the state, lawsuits about the constitutionality of said laws, and basically anything but increased state revenue.
These laws started appearing several years ago, and despite opposition and lawsuits, more and more states have attempted to enact similar laws. This is something I’ve kept an eye on since it began, given that I make a not-insignificant portion of my income from affiliate marketing.
Still, it’s been not my greatest year in terms of keeping on top of work-related things, and so I was a little surprised when the “We’re very sorry, but we’re terminating all of our affiliates located in Georgia” emails started rolling in. What? Oh, hello House Bill 386 and its wake of despair, let’s not pay any attention to what a miserable failure similar laws have been in New York, North Carolina, and Illinois… come on in!
The bad news is that I have indeed been dropped from a bunch of affiliate programs already. The good news is that years of dealing with similar laws have made some of the larger merchants (like Amazon) not quite so trigger-happy, and the fallout (so far) hasn’t been nearly as brutal as what residents of the earlier states had to deal with. My fingers are crossed that this continues to be true; time will tell.
So what does this mean for you? If you ever post, say, Amazon affiliate links, you should probably keep an eye on the legal issues surrounding these laws even if they’re not happening in your state, because your state could be next. I’ve heard stories of affiliate programs closed down in some states and people actually relocating to reopen business with them. (As a freelancer, that seems crazy to me, but if that was my only source of income, I guess I could see it.) As always, a good accountant can advise you if you have questions… though that wouldn’t be much help if all the affiliate programs suddenly pulled out of your state, probably.
It’s a brave new world out there on the ‘net, folks. A brave new annoying and complicated world.
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