Options for Minnesota Amazon Affiliates

Update: In 2014, Amazon removed Minnesota from the "banned" list. Therefore, this information no longer applies to Minnesota affiliates. However, this information is still useful to affiliates in other banned states.

If you're an Amazon affiliate living in Minnesota, you're probably wondering if you have any options. On this page, I'll do my best to explain the available options. I'm an attorney (and Amazon affiliate) in the Twin Cities. The purpose of this page is to give you some information to help you make an intelligent decision about how to proceed. In most cases, it's probably not worth retaining me, but in some cases, my assistance might be helpful.

June 19, 2013

If you are an Amazon affiliate living in Minnesota, you probably received an e-mail telling you that your participation in the program has come to an end. The Minnesota Legislature jumped on the "tax Amazon" bandwagon. Amazon does not collect Minnesota sales tax on purchased shipped to the state, because it doesn't have any physical presence here. The Legislature, in its infinite wisdom, declared that the presence of affiliates in the state was enough of a connection, and started counting the money that would start flowing into the state coffers from Amazon.

Amazon, however, thought otherwise. And just like it did in other states, it decided the easiest solution to the Minnesota problem was to simply fire the Minnesota affiliates. This is a logical decision on their part. Other affiliates in other states will certainly pick up the slack, and everything will remain as it was before. Namely, the State of Minnesota won't see an additional dime in tax revenue. We told the legislature this was going to happen, but they didn't listen. Now, Minnesota affiliates need to figure out what to do.

I'm an Amazon affiliate, and I have some links on my websites at w0is.com and richardclem.com. For me, the affiliate links are essentially a monetized hobby. I have websites that explain things such as how to hook a water pressure regulator on your camper. I enjoy writing these pages, the people who find them get useful information, and I make a little bit of money in the process. But this is a small part of my income, since I'm also an attorney and continuing legal education provider. It was nice getting a few extra dollars now and then from Amazon, but it won't break me to have that end.

On the other hand, I'm well aware that some people make a living from Amazon affiliate links. Thanks to the Minnesota Legislature's decision, those people are now out of work. They were making an honest living, but the Legislature decided that they would be better off unemployed (and not even eligible for unemployment compensation). I don't know the best alternative, but this page will help you think about what alternatives are available.

Vote The Bums in the Legislature Out of Office.

Whatever else you do, let's not let this happen again. This was an incredibly stupid decision by the Legislature. I knew that they wouldn't get any additional tax revenue. I knew that they were closing down an honest business opportunity. Any halfway intelligent person could have told you what was going to happen, because it happened in other states. The Legislature either didn't know or didn't care. Either way, it seems to me that any legislator who voted for this doesn't deserve to be re-elected. You can find the name of your legislators at this site. Then, find out if they voted for this. You can find the actual vote at the website of the house and in the Senate Journal (look under "Call of the Senate" on page 5750). If your Senator or Representative voted "no" on this bill, then they deserve your thanks. If they voted "yes", then you should vote against them in November, 2014. They voted to put you out of work, so you should vote to put them out of work.

Do Nothing.

If you are like me, and you make a few extra dollars with the affiliate links, your best alternative could very well to do nothing. All of the alternatives listed here will entail some expense on your part. I'll do my best to give you an idea how much each of those alternatives will cost. You'll need to decide whether it is worth it.

There's always a glimmer of hope that the affiliate program will return. When the California affiliates were fired, the State of California eventually relented, and they were reinstated. There's always a chance that will happen here, eventually. As far as I know, the links and images on your website will continue to function. Your visitors will still be able to view the images, and they'll still be able to click on the Amazon links. The only thing that will change is that you won't get paid.

Move to Another State.

If I was making a significant income, this is what I would do. It's one thing to be told that I have to pay more taxes. But if I was told that if I want to keep my job, I have to move, then I would probably move.

If you do plan to move, then you need to really move. When you ask Amazon to reinstate your account, they will almost certainly ask for proof of residency in your new state. In other words, you can't simply find an address in another state and say that you moved there. First of all, you would be lying, and that's always a recipe for trouble. But more importantly, it won't work, because Amazon will ask to see the proof of residency in your new state. In other words, you can't just rent a mailbox at the UPS Store in Hudson, Wisconsin. You will need to come up with the normal things evidencing a move, such as your new Wisconsin driver's license, your Wisconsin lease, your Wisconsin voter registration, etc. If you don't plan on getting those things, then it's not worth finding an address at the UPS Store or a friend or relative's house. Again, if you plan to move, you need to really move.

Give your Account to a Friend or Relative

It is possible to transfer an Amazon affiliate account. More complete directions are found below. If you're not making a lot of money with your account, you can just give it away to a friend or relative in another state. This might be the best option for some. If you were making $100 per year, that $100 per year is now gone. If you simply give the account away, the recipient will get the $100 per year, which is better than nobody getting it.

Of course, if your account is generating significant income, it might be possible to sell it to a new owner. You have a going business, and you are simply selling your business.

Whether you give it away or sell it, it's no longer yours. So this is probably a last resort. But in some cases, it might be the best option.

Incorporate in Another State

This option is relatively expensive, and will make your business much more complicated. But it might be a way to salvage your business for Amazon Associates Minnesota.

You are now barred from the Affiliates program because you reside in Minnesota. As noted above, your website can continue to participate if you sell it to someone in another state, including a company in another state. Amazon (and the tax authorities) are only concerned about where that company is located. They don't care if the owners of that company happen to live in Minnesota. And they don't care if the people who work for that company happen to live in Minnesota (but they can't be employees in Minnesota). All they are concerned about is where the company is located. If it's located in another state, then it is not a Minnesota resident, and it is eligible to be an affiliate.

What does it mean for a company to be located in another state? Again, the residence of the owner isn't important. And the residence of the people who work there isn't important. (However, the place where those people do the work might be important, so keep that in mind in your planning process.)

The two most important factors are the state of incorporation and the physical location. A virtual business such as a website doesn't really have a physical location. Perhaps you do most of your work while traveling. Perhaps you do the work at a library in Wisconsin. Perhaps you do most of the work at a coffee shop in Iowa.

The company also needs to receive its mail somewhere, and that location will always be in a particular state. There might be other factors, but I think the mailing address is probably the most critical factor in determining the physical location. So the company that takes over your website and affiliate links should have a mailing address in another state.

Choosing a state in which to incorporate

The other important factor is the state of incorporation. It is possible to form a corporation in any state in the Union. Most Minnesota businesses incorporate in Minnesota. But this is not the only option. Companies incorporate in other states for a variety of reasons. As you're probably aware, many large companies are incorporated in Delaware.

To form a corporation, you need to prepare "Articles of Incorporation" and file them with a state office. In most states (including Minnesota), this office is called the "Secretary of State". In some states, it goes by a different name, such as the "Department of Corporations." But whatever the office is called, you simply send (by mail, fax, or electronically) the papers to this office, along with a fee. When they receive this, they form the corporation and send you back a certificate. At that point, your corporation exists as a legal entity in that state, and is able to do things such as enter into contracts with Amazon.

There are some formalities that need to be taken care of when forming a corporation. Most of these are not particularly difficult. These are described on my Incorporation Page, along with some discussion of the types of corporations available (C Corp, S Corp, or LLC). That page describes the process in Minnesota, but the process in other states will be similar. There will be some ongoing expenses, which are explained below.

There are a number of factors to consider when choosing a state in which to incorporate.

First of all, you obviously want to avoid the other states that Amazon has blacklisted. Obviously, you don't want to incorporate or use a mailing address in one of those states. According to Amazon: "Residents of Arkansas, Colorado, Illinois, Minnesota, North Carolina or Rhode Island are not eligible to participate in the Associates program."

Finding a registered agent

The next factor you will need to consider is the need for a "Registered Agent" and a mailing address in that state. As far as I know, all 50 states require you to have a "Registered Agent" who is a resident of the state where you want to incorporate. That person must have a street address in the state, and they must actually reside there. The registered agent cannot be located at a P.O. Box or at a location such as the UPS Store. They need to really live in the state, and they need to have a physical mailing address.

The "Registered Agent" doesn't actually do very much. If you have a friend or relative in another state, they can serve as your Registered Agent. Their only responsibility is to receive any official papers that are sent to the company. Usually, this consists of an annual notice from the state. You are responsible for any such notices that are sent to your Registered Agent, so it should be someone who is reasonably trustworthy. Also, in the unlikely event that your corporation gets sued, the Registered Agent will be served with a copy of the lawsuit papers. Again, you are responsible as soon as they receive it.

Your Registered Agent also needs to be aware that their name and address will be listed if anyone ever looks up the company on the state's website. Some people are skittish about privacy, so they should be aware of this. Also, the Registered Agent will receive a small amount of junk mail addressed to your company.

If you don't have any friends or relatives who are willing to do this for you, there are companies that perform this service. The cost is typically about $100 per year, although many of them have special offers that will give you the first year free.

A mailing address

However, if you do use one of these companies, you need to be aware of one thing. For about $100 per year, these companies will forward the official documents to you. And in the unlikely event you get sued, they will forward the lawsuit papers to you. But most of these companies will not forward normal mail, unless you pay extra for that service. They will throw away the junk mail, which is fine. But when the check from Amazon comes, they will mark it "return to sender" and send it back. Therefore, if you are using one of these companies for your Registered Agent, you will need to have a second address that you can provide to Amazon.

Even if you currently have direct deposit, there will probably be at least one paper check that is sent to your new company's address. The Amazon money no longer belongs to you--it now belongs to your company. Therefore, it can't go into your personal bank account. At some point, your new company will need to open its own bank account. But there will probably be some delay in getting the bank account and the direct deposit set up. During this period of time, there will probably be at least one paper check, and you need to provide an address outside of Minnesota where you can get it. I suppose that address could be in a third state. But it's probably best to have it in the same state where the company is incorporated.

Therefore, when picking a state in which to incorporate, it's probably best to start with the states where you have a friend or relative. They can serve as Registered Agent, and they can also take care of the check when it arrives.

If you don't have a friend or relative who can forward your mail, another option is a commercial mail forwarding service. These companies probably won't handle the "registered agent" service described above, but they can provide a mailing address. There is usually a monthly fee for mailbox rental, and another fee when they send the mail to you. Different services break these down differently, but you can probably expect to pay about $10 per month. Most of these companies cater to full-time RV'ers who live in their RV but need a permanent address. Many of these companies are located in tax-friendly states such as South Dakota, Texas, and Florida. While their main business is RV'ers, most will provide the service to a corporation. There is a list of these services and a description at this site, which is an RV blog. I don't have any experience with these particular companies, but they would be a good option for a business that receives a small amount of mail.

Costs of incorporation

Once you have come up with possible states where you can find a friend or relative to be your registered agent, you need to decide which of those states is the best. Some states are more expensive than others. Every state has a filing fee, and these vary from about $50 to $300. In addition, most states have some annual fees or taxes that need to be paid. These annual fees can vary widely. And in some states, you will need to file an income tax return. For example, the initial cost to incorporate in Nevada is quite low, and there are also registered agents who will also handle mail forwarding for a reasonable price. But in Nevada, the annual costs are over $300.

You can find the initial filing fee at this link .

I haven't been able to find a convenient chart showing the annual fees, partly because these will vary depending on different factors. Of the ones I've researched, Iowa and Utah are both fairly reasonable. There are probably others. Once you have picked a state that will be convenient for you, you do need to carefully research on that state's website to find these fees and taxes, since they are not always obvious.

The process of incorporating

In addition to forming your corporation, you will need to obtain a federal Employer Identification Number. When you receive that, you can open a bank account for your new company.

The general process of incorporation is described on my Incorporation Page. That page is geared toward Minnesota, but the same general principles will apply in other states. As you can see, it will entail a lot of work. But if it's what you need to do to preserve your business, it might be worth the trouble.

You can prepare and file the necessary papers yourself. There are also many companies on the internet that will perform this simple task, usually starting for about $100.

If you want me to assist you, my fee in most cases will be $200. This includes an initial consultation (by phone or in person), drafting the Articles of Incorporation and related corporate documents, assisting you with applying for the Employer Identification Number, and preparing a bill of sale to transfer your website and affiliate business to the new company. I am not a tax expert, and I strongly advise you to talk to your tax adviser about the tax implications. You will probably need to file a state tax return in your state of incorporation.

You do need to be aware that you are still ineligible to be an affiliate if your new business either owns tangible personal property located in Minnesota; or, has one or more employees providing services for the business in Minnesota. As you structure your new business, make sure that your new corporation does not fit within either of these provisions.

Using an Affiliate Aggregator and/or a Different Affiliate Program

I do not have any experience whatsoever with this process, but it might be worth researching. For further information about this process, see the following link: this link. Another option, with which I have absolutely no experience, appears to be viglink.com. It looks like using that program will give you an indirect method of linking to Amazon (and other sites), but you'll probably have to remove your current Amazon links. Again, I know absolutely nothing about them, but it appears to be one option to continue to monetize your site. Update, Sept 2013: Another aggregator that some former Amazon affiliates have been using was skimlinks.com. Unfortunately, Skimlinks has just announced that affiliates in Minnesota (and the other states in the same situation) can no longer use Amazon links through Skimlinks.

Of course, there are other retailers with affiliate programs. In my experience, Amazon is the best, but you can always cut the ties and put links elsewhere. Many of my products I mention are sold at Harbor Freight and WalMart icon , so I just signed up for their programs, and I'll see how they work out. Harbor Freight is part of Commission Junction, and WalMart icon is part of LinkShare. In fact, LinkShare has its own affiliate program, so if you sign up, please use the link below:

Making the Change to Your Amazon Account

Once the new corporation is set up (or you've decided on a friend to whom you can give away your business), the process of transferring the account is relatively straightforward. You and the new owner go to this link. There, you change the name, address, and taxpayer ID number.

Then, you need to change the e-mail address, which is only slightly more complicated. First, you log in with your old e-mail address and password. The new owner's e-mail address needs to set up an Amazon password. Then, you add that address as an "invited user". Then, you designate that address as the primary account holder. Then, the new e-mail address owner logs in and deletes your old address from the account. At that point, the Minnesota nexus is gone.

A Really Bad Idea: Using a Friend's Name

As noted above, it won't work to use the UPS Store in Hudson, Wisconsin, because you won't be able to provide proof of residency. It's an even worse idea to transfer the account to a friend in another state, and then expect the friend to send you the money. As noted above, your friend will need to provide his or her Social Security Number. And at the end of the year, they will get a 1099, and they will owe taxes on the money. If they're in a higher tax bracket than you are, they'll be stuck paying the taxes. If they're in a lower tax bracket than you are, then you're basically committing tax evasion. I suppose it would be possible to do this legally, but it would entail additional tax reporting for both of you. It's probably not worth the trouble.

If you really do just give the account to your friend, that's fine. But if you expect them to send you the money when they get it, it quickly turns into a very bad idea.

I hope you have found this information helpful. If you would like to contact me, my e-mail address is clem.law@usa.net.

For another Minnesota attorney's take on this issue, see this link regarding Amazon affiliates Minnesota.

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Copyright 2013, Richard P. Clem. Attorney Richard P. Clem is responsible for the content of this page.

Richard P. Clem, Attorney
PO Box 14957
Minneapolis, MN 55414
Phone: 612-378-7751
e-mail: clem.law@usa.net
Minnesota Attorney Registration Number 0192648