I was afraid this was going to happen, as certain California politicians have been pretty determined to get this done, despite the examples set in other states. California’s new budget includes a provision often called the “Amazon tax,” which means that qualifying businesses which use affiliate marketers in the state of California are now responsible for collecting California sales tax. Amazon is the big target, hence the nickname, but other businesses will be affected as well.

And it went as it did in every other state that has passed this kind of law, with the dropping of all affiliates in the state. No new sales tax income for California, affiliate incomes drop, some planning to leave California entirely, while others are talking lawsuit. Yep, great plan, California. Thanks a bunch.

The thing that annoys me most about Amazon dropping affiliates in California is that they may have to collect sales taxes here anyhow. They have subsidiaries in California, and the law includes that sort of presence. Seems to me that California might be a good place to fight these laws.

It’s early yet, so we’ll just have to see what the reaction is long term and how any lawsuits go. California’s a big state; I don’t expect things to go quietly.

As for me, I’m glad that I didn’t get going on too many ideas for affiliate sites based on income from Amazon. I don’t think my best program will be affected by this tax, but I’m not 100% positive. Either way, I have a lot of links to locate and change, and fast, as the law goes into effect on Friday. Gotta love the reasonable notice too, guys!

Writing reviews is a popular way for affiliates to earn money. Share your thoughts on the product, link to it, and you have a chance to earn money on the commissions from your referrals. It’s a model that makes giving every product a highly positive review tempting. But does this mean you should forget writing negative reviews on products that deserve one?

Reviewing a product negatively is actually a pretty good idea. If you rave about every product you review, it can be harder for people to decide if they can trust what you say. Honestly saying that you don’t like a product builds trust for those times you love the product.

Most reviews should get into both the positive and the negative aspects of the product. There just aren’t that many products that are 100% perfect. Maybe you would like to see one minor feature added or removed. Maybe it’s only good for beginners or for experts. Maybe it’s exactly the wrong shade of pink.

There are some important things to remember when you do a negative review. First and foremost is to keep things factual. No name calling or stuff like that which could get you in legal trouble. Stick to the features of the product. Be professional. You can still include your affiliate link if you so choose, even if you despise the product, since some people will buy anything, others will disagree with your review and like the product, and if the site has other products to buy, you may still benefit from the affiliate link.

This doesn’t mean you should choose products specifically because you can review them negatively. Look at the things that are interesting to people in your target market. If they don’t work the way your target market would want them to, those are the products that should get a negative review. If they’re good, give that positive review, with appropriate note of the parts that aren’t quite what you’d like.

Your time is probably best spent on reviewing products you can enthusiastically recommend. You want to keep offering value to your readers, and that most often means something they can use. But when there’s a product that a lot of your readers are interested in and you just can’t recommend it, say why! That’s giving value too

There has been a lot of chatter online about changes Clickbank is about to make for vendors. These changes sound really good to me, as many will impact the business opportunity offers that make outrageous claims.

Here’s a quick rundown of the changes. If you want to see the whole thing, it’s on this thread at Warrior Forum.

1. Don’t make major pitch page changes after product approval. Changes should be sent to Account Manager for approval.

2. Internet Marketing products need to follow FTC rules, such as not giving the impression that you can earn easy money with little work or imply earnings are guaranteed.

3. False scarcity is discouraged.

4. Sales pages that include Clickbank stats must be verified by Clickbank and have been earned by the method being promoted.

5. Videos that include a Buy Now link must also display the price of the product.

6. Products must be usable on their own. They cannot require an upsell to function. Customers must be able to download the product before dealing with upsell offers.

There’s a bit more, but those are the big ones, and very welcome in my opinion. Too many Clickbank products in the internet marketing niche go way beyond what I understand to be acceptable according to the FTC.

The big question is how well they will implement and enforce these changes. They’re pretty huge, considering how many products sold there are what I would call highly questionable. While I very rarely buy products, I hate seeing how many launches don’t make it clear what it is you’ll be doing and just say you’ll earn big money with no effort. Gives the entire industry a bad name. Some people do earn big money online, but it takes time and a whole lot of effort.

It’s not clear if this will also impact previously approved products or if this is just going forward. I’d like to see a lot of current products cleaned up.

Of course, Clickbank has made changes to the rules before to comply with the FTC, but that hasn’t stopped the problem, because either the rules weren’t strict enough or they weren’t enforced properly. We’ll see how things go this time.

It has already happened in other states such as New York and North Carolina. States have changed their tax laws so that companies such as Amazon that have affiliates in that state will be required to collect and pay sales taxes on sales made in that state. The immediate response by Amazon and many other companies has been to drop all affiliates in those states so they can continue to avoid collecting sales taxes in those states. This has been devastating to many affiliate marketers.

California, the state I live in, is seriously considering this action yet again. It’s a proposal that has been beaten back a couple times now, but it just won’t go away. The state needs money and this looks like an easy way for them to get a lot of it very quickly. AB 153 and AB 155 are proposals that might have a huge effect on affiliates in California. Hearings will be on March 7, 2011 in Sacramento, for any affiliates who can get there and testify about the impact these would have on their businesses.

Too bad it doesn’t seem to work. Once the affiliates are dropped, the companies no longer have a presence to concern themselves with, and can continue to refuse to collect the sales tax. Meanwhile affiliates have less of an income and pay less income tax. Not exactly what the states hope for.

That said, I can see where it’s not unreasonable to say that something needs to be done. Many people don’t realize they’re supposed to pay a use tax if they buy something out of state and their home state would have collected sales tax if the purchase had been made there. The use tax is the same amount as the sales tax, minus any sales tax paid to the state the purchase was made in, usually zero if you’re talking about online purchases. Yes, theoretically most states want you to pay on those purchases you make on vacation. But that’s not the focus here.

The focus here is on what you can do if you suddenly lose all income from Amazon and other such links. Being dropped from such profitable programs is painful if they’re your major income source, a potential financial disaster. You need to consider a backup plan if your state starts considering this kind of legislation with any seriousness at all.

What can you do?

Start by opposing the legislation as it appears in your state. If you don’t speak out, how will your legislators know how such a law would hurt you? Taking some time to fight the legislation before it’s passed gives you a chance to protect your income. Visit the Performance Marketing Association website to find out what’s going on in your state. There might be something you can do to help beyond simply emailing your legislators about the problem. They often aren’t familiar with affiliate marketing and don’t realize how ineffective these bills are at collecting taxes or how damaging they are to this kind of business. You can help to educate them.

For Californians, here’s a link to help you contact the Assemblymen on the Revenue and Taxation committee, as well as your own Assemblymen. Be polite and make it clear how damaging this could be to your business, plus how the bill will not bring in tax money to help the budget. Point out the responses to the bills passed in New York, Rhode Island and North Carolina, where affiliate contracts were simply terminated. Ask them directly to not support these bills.

As you fight, consider your options in case it does pass. Where else can you earn an income that won’t be lost? Are there other retailers you can affiliate with that are already in your state and therefore collect and pay sales taxes already? Will you need to go to AdSense? Are there any ebooks or other nontaxable items you could sell instead? Preparing now can limit the damage if things go wrong, as well as diversifying your income sources, always a good idea.

The problem with many of the options is that they aren’t necessarily as profitable for you as an affiliate. When you have a site set up to sell a particular product it’s not always easy to replace a merchant. Other merchants may not convert as well or may pay lower commissions. Amazon in particular is difficult to replace because even when customers you refer don’t buy exactly what you recommended, they may buy something else from a huge range of categories.

Whatever you do, don’t just sit and hope the bills don’t pass, or mope about the loss of income. Take action. That’s how you got your online business started in the first place and that’s what you need to do to keep it.

Many affiliates love pay per lead affiliate programs. They can pay very well, sometimes for as little as a zip code, other times for more detailed information, all without a purchase. It’s much easier to get a bit of information from someone than it is to get them to buy something.

That doesn’t mean it’s always the way to go. Sometimes pay per lead is the worse choice when an affiliate program gives you a choice between them.

You don’t often have a choice between pay per lead and pay per sale, but once in a while you do. If you have the choice, it can pay quite well to analyze each option. You might be surprised by the results.

There’s an affiliate program I’m a member of. I’m not sharing what it is or what I’m offering with it, but it does have the choice of pay per lead or pay per sale, depending on which side of the program you sign up with. The leads pay reasonably. The sales side gives a bonus as you make more sales.

It’s a bit of a challenging program to analyze, as it doesn’t share stats on the sale side. Software’s old on that side, I guess, and affiliate information is very limited. But I make decent money with this program.

When the pay per lead program came up, it drove me nuts! I didn’t know if I would make more or less money that way. I had no way of knowing how many of the leads I sent to the site were converting to the sales they paid me on.

I spoke to my affiliate manager the other day however, and found out how many leads I’m generating per month on average. Talk about useful information! Now I know I’m making the right choice with this particular program to stick to the sales side. I make significantly more money that way.

I would not assume that’s the case every time, especially since most programs offer only one or the other. But when both are available, the analysis is worth the time.

If the pay per lead side of things doesn’t include sales stats, the simplest way to get the information you need is to go for the pay per sale. Most programs include enough statistics for you to know how much traffic and possibly the number of leads you’re sending in order to make a sale. With this, you can decide which type of program is right for the sales you’re making.

Don’t assume one answer or the other will always be right. Keep track of the results you’re getting. Talk to your affiliate manager as necessary. It’s amazing what you can do to improve your income when you keep track of the right statistics.