Whether affiliate marketing is your “day job” or just a supplemental income; there are several factors that should be considered when deciding the best place to establish and run your performance marketing business.

I was recently reading an article about the best states to make a living in and it got me thinking: what are the best states to make a living as an affiliate marketer?  While the article I was reading evaluated: average income, cost of living, state income tax rate, and state unemployment rate; I didn’t find it relevant for affiliate marketers who are both entrepreneurs and business owners. 

In recent years, ‘Affiliate Nexus Tax’ laws have become the main driver behind which state affiliates should reside in.  Newly proposed federal sales tax reform, if passed, will enable affiliates to approach this topic more strategically as a business owner.

Like any business owner corporate tax, personal income tax, and state sales tax rates are all key factors for affiliate marketers when making this decision.  After doing some research I discovered a report The Tax Foundation publishes each year called the State Business Tax Climate Index, which provides more insight into the subject and ranks each state based on several tax components.

According to their website, the “State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare.”  I found their report to be comprehensive and thought it would be interesting to compare the states that rank in the top 10% with the states that rank in the bottom 10% and how affiliate nexus tax fits into the equation.

Top 5 States

(Note: a rank of 1st is best in the rankings below. For the Business Tax Climate Index, the higher the score, the more favorable a state’s tax system is for business.)

1. Wyoming

Business Tax Climate Index: 7.67

Corp. Tax Rank: 1st

Individual Income Tax Rank: 1st

Sales Tax Rank: 13th

Affiliate Nexus: No

 

2. South Dakota

Business Tax Climate Index: 7.54

Corp. Tax Rank: 1st

Individual Income Tax Rank: 1st

Sales Tax Rank: 34th

Affiliate Nexus: No

 

3. Nevada

Business Tax Climate Index: 7.45

Corp. Tax Rank: 1st

Individual Income Tax Rank: 1st

Sales Tax Rank: 42nd

Affiliate Nexus: No

 

4. Alaska

Business Tax Climate Index: 7.36

Corp. Tax Rank: 27th

Individual Income Tax Rank: 1st

Sales Tax Rank: 5th

Affiliate Nexus: No

 

5. Florida

Business Tax Climate Index: 6.90

Corp. Tax Rank: 12th

Individual Income Tax Rank: 1st

Sales Tax Rank: 19th

Affiliate Nexus: No

While the states that ranked in the top 10% may not have been the states I would have anticipated, it appears that they all share a common strength: an effective tax system designed to attract and retain businesses, like affiliate marketers.

When I began to analyze the states that ranked in the bottom 10%, I discovered there was a strong correlation between those states and affiliate nexus tax.  In fact, the states that ranked in lower 10% had the highest concentration of affiliate nexus tax laws being passed.

Bottom 5 States

 

46. Rhode Island

Business Tax Climate Index: 4.18

Corp. Tax Rank: 40th

Individual Income Tax Rank: 36th

Sales Tax Rank: 24th

Affiliate Nexus: Yes

 

47. Vermont

Business Tax Climate Index: 4.17

Corp. Tax Rank: 41st

Individual Income Tax Rank: 47th

Sales Tax Rank: 14th

Affiliate Nexus: Yes

 

48. California

Business Tax Climate Index: 3.71

Corp. Tax Rank: 43rd

Individual Income Tax Rank: 50th

Sales Tax Rank: 40th

Affiliate Nexus: Yes

 

49. New York

Business Tax Climate Index: 3.59

Corp. Tax Rank: 23rd

Individual Income Tax Rank: 49th

Sales Tax Rank: 37th

Affiliate Nexus: Yes

 

50. New Jersey

Business Tax Climate Index: 3.33

Corp. Tax Rank: 39th

Individual Income Tax Rank: 48th

Sales Tax Rank: 46th

Affiliate Nexus: No

The state of Illinois was also mentioned in the report.  While ranking in the middle, Illinois moved most dramatically in its Index rank over the past year, falling twelve places (from 16th place in 2011 to 28th place in 2012).  In 2011 Illinois passed House Bill 3659, the state’s affiliate nexus tax, and has been one of the more high-profile cases as affiliates relocated their business outside of Illinois in order to avoid being dropped by advertisers.

Summary

While affiliate nexus tax law may be a significant factor in determining where affiliates live and run their business today, this will likely change in the future as more federal solutions are introduced and explored.  For affiliate marketers, this means that they will soon be facing the same tax burden challenges as other businesses and need to determine the most cost-effective place to establish their business.  States that create effective tax systems that are hard-working for both businesses and individuals will attract and retain affiliate marketers, while states that rely on complex taxation with high tax rates will continue to struggle as businesses relocate.

Opinions expressed in the article are those of the guest author and not necessarily Marketing Land.

Related Topics: Affiliate Marketing | Affiliate Marketing Column | Channel: Content Marketing

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About The Author: is the CEO of iAffiliate Management, an affiliate management agency that helps consumer technology and internet retailers extend their brand to acquire customers they could not otherwise reach.




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  • http://twitter.com/WesleyLeFebvre Wesley LeFebvre

    Another interesting fact:

    Top 5 states = Republican
    Bottom 5 states = Democratic

  • http://www.amnavigator.com/blog Geno Prussakov

    Rick, this is a truly excellent topic for an article! Timely — in light of the last week’s developments in Georgia — too.

    I’m not so sure about South Dakota though. It, actually, currently has
    two bills proposed (SB 0146 and SB 0147) which do attempt to establish
    nexus for out-of-state merchants. Should any of these pass, the affect
    on affiliates would more than likely be negative.

    From the top 10 states on the Business Tax Climate Index I, personally,
    would much rather go with New Hampshire or Montana, neither of which
    have sales tax (so are the least likely to go the “affiliate nexus tax”
    route). By the way, Delaware, Oregon, and Alaska are the other states
    that don’t.

  • http://blog.affiliatetip.com Shawn Collins

    Two years ago, I was thinking about where to move (from NJ), based on a lot of these factors, but also others, including climate, things to do, health of the local economy, proximity to a big airport, etc.

    I ended up in Austin, TX, and don’t miss NJ one bit.

  • http://www.facebook.com/profile.php?id=6907123 Justin Rondeau

    Rick,

    Great article! Hope all is well.

  • Sabrina Malone

    We left Jersey for Delaware based upon the tax climate for small businesses. The fact that Delaware has no State Sales tax means there is no risk of a Nexxus tax ever being levied upon affiliates here.  An important consideration given the nature of our industry.

  • Ismat Ara

    Oh nice

  • Anonymous

    does political view have an impact on the list or was that just coincidental?

  • Rick Gardiner

     Hi Mel – Political view had no influence on the list.

  • Rick Gardiner

    Hi Geno – Thanks for the feedback and sharing your insight.

  • Anonymous

    i see, i was thinking Wesley had pointed out something really interesting that i would need to do further research on, i’m doing a bit of study on this actually

  • http://twitter.com/WesleyLeFebvre Wesley LeFebvre

     Hi Mel,

     I think what Rick was saying that “his” political view had no influence on the list.

    I just thought it was interesting that the bottom 5 states were democratic, while the top 5 were republican. Definitely something I’d look into further and keep in mind if I were moving my business.

  • http://robertclarkmtfs.com/ Robert Clark

    Fun and unique article on affiliate marketing. I live next door to Wy, maybe I should move lol

 

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