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Overstock.com Redirects Ad Dollars to California Customers

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As Nikki mentioned yesterday, Overstock.com joined Amazon in cutting ties with its California affiliates as a result of the new Internet state tax law. The impact of this for some bloggers is quite large as they wave goodbye to a large portion of their earnings.

Overstock  announced today they are redirecting their ad dollars to California customers by offering them free Club O accounts ($20 value) pre-loaded with $10 in Club O Reward dollars.

Here’s the statement released by Overstocks’s CEO:

“California’s new law that makes out-of-state retailers collect sales tax simply for having business relations with marketing affiliates in those states is unconstitutional,” said O.co CEO Patrick Byrne. “So we have severed relationships with all of our affiliates in California.  Like we’ve done in other states, we have taken the money we would normally pay those affiliates, and are using it to reward our best customers in those states. Any customer in California that has spent more than $300 in the past year will receive a free Club O membership (normally priced at $20) and their membership account will come preloaded with an additional $10 balance. Those qualifying that are already Club O members will also have $10 added to their existing Club O Rewards account and their membership extended for one year.”

Overstock has also cut ties with its affiliates in Arkansas, Connecticut, Illinois, New York, North Carolina, New York and Rhode Island.

What do you think Overstock is trying to say by offering this deal to some of its California residents?

Overstock Joins Amazon in Pulling California Affiliate Programs

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Overstock.com has joined Amazon in the mass exodus to drop California affiliates and avoid charging sales tax to consumers in that state – all as a result of a new Internet state tax law. Who will be next? And what will happen to California bloggers, podcasters, and other sites who rely on this revenue as income?

While a huge majority the 25,000 affiliates won’t, or can’t afford to, up and leave the state – many will have no choice, especially those with a larger amount of employees.

“This law won’t impact Amazon that much but it is a crisis for website owners who make revenue by placing ads on their websites for thousands of online retailers,” says Rebecca Madigan, executive director of the Performance Marketing Association.

Experts say it could impact 20-30% of small business website revenue – but I think it depends on the industry and blog. Some websites will see their income slashed completely, while others won’t even see a bump. Review sites rely heavily on their affiliate advertising, while entertainment blogs rely mostly on advertising sales and Google Adsense.

And who knows if it will actually help the state of CA? Proponents of the tax claim the new law will raise $317 million in revenue a year. But other states have seen quite the opposite. Those that have implemented similar tax bills have seen the entire thing backfire, says John Henchman of the Tax Foundation. In fact, Rhode Island officials reported that their overall tax collections fell when the affiliate contracts were terminated.

How is this new law impacting you? Do you live in a state with a similar Internet sales tax law? Are you concerned that your state may implement it next?

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