act.ly and the California “Affiliate Tax”

Sign the petition

Before I start, I am going to ask that you sign the petition I started. It is all explained below. To sign, just tweet the following on Twitter:

petition @nmevans to Stop the #affiliatetax. Don’t hurt small biz in CA! http://act.ly/q retweet to sign

From the beginning… AB178

Brook Schaaf has a good write up on the California Affiliate Tax.

act.ly and my petition

My friend Clay Johnson told me about a new website, act.ly that launched this week. It is a brilliant idea. You can read the inspiration for it here. It is a service to post petitions that get signed when people retweet on Twitter. It requires that the person starting the petition select a single Twitter account to receive all of the votes.

I decided to give it a try. I found the account for Noreen Evans, the chair of the California Legislature’s Budget Conference Committee (or an account that appears to be hers). I hope that she reads the petition, the e-mails she is getting and this blog post. I hope that she sees that the bill, while well-intentioned, does not achieve it’s goals and will hurt some of California’s small businesses.

As you know, changes to the definition for nexus were proposed in February as AB178 by Assembly member Nancy Skinner. She was unable to get the votes required to send the bill to the full Assembly so she tabled it (made it a so-called two-year bill which gave her until January, 2010 to get it through the Revenue and Tax Committee). There wasn’t a hearing on the bill. I know that because I received an e-mail telling me that the bill would not be heard as my cab pulled up to the state capital when I was going to testify.

It’s baaaaaaaaaaaaaaaack!

Things work differently in government than in business. The Budget Conference Committee spent the better part of a month working out the details of the budget. At 6pm on the last day of negotiations, a trailer bill was introduced with 9 provisions, one of which was AB178. There was little or no debate and no opportunity for public comment. It was passed along party lines.

Amazon says “NO!”

This week, Amazon sent a letter to state leaders letting them know that Amazon would terminate its California Associates (affiliates) should the definition of nexus change. Many other online retailers will follow suit and terminate affiliates.

Failure to achieve its goals

Lawmakers state 2 goals in AB178:

  1. Increase the State’s revenue
  2. Help brick-and-mortars

Should retailers terminate affiliates, neither goal will be achieved. Affiliates from other states and abroad will find ways to pick up the sales as those of us hurt by the bill see our user bases disappear and our revenues decline. That means that there may be a net decrease in revenue for the state.

Brick-and-mortar, if they have been hurt by stores such as Amazon not collecting sales/use tax, would see no benefit as Amazon will continue to not collect sales/use tax from Californians. So the B&Ms aren’t helped and businesses that use affiliate marketing are hurt.

Or are we?

I try to run my business in a way that is good for our store partners and our shoppers. I spend time looking for ways to build sites that add value, not looking for loopholes. Should this bill pass and we get terminated by the likes of Amazon and Overstock and others, there is a HUGE loophole that was created in the latest draft of the bill.

If we are terminated by stores for using commission-based compensation, why not switch to using links from comparison shopping engines? Of course, this solution works for some business models and not others. We can’t offer cash back from those links but we can maintain the relationships until we see some rationalization in the market.

Budget Vote Crisis

The state legislature voted on parts of the budget yesterday and did not pass them. The change in nexus for out-of-state retailers is in a separate trailer bill. So there is still time. Please sign the petition by tweeting the following:

Sign the petition!

petition @nmevans to Stop the #affiliatetax. Don’t hurt small biz in CA! http://act.ly/q retweet to sign

About David Lewis

David Lewis is the CEO and founder of 77Blue which operates online shopping websites. Prior to that, he worked in business development at GoTo / Overture. David was a product manager and accountant in past lives. In 2006, David won Commission Junction’s Horizon Award for Innovation and was a finalist for Linkshare’s Golden Link Award. You can find David on Twitter @thedavidlewis.

Twitter: thedavidlewis

2 Responses to act.ly and the California “Affiliate Tax”

  1. [...] act.ly and the California “Affiliate Tax” | ReveNews [...]

  2. It seems that there's a serious case of short-sightedness among lawmakers and tax collectors who are facing budget and cash shortfalls. As if it isn't enough that that CA legislators are trying to require retailers to collect CA Sales tax from sales that originate from affiliates domiciled in the state, the city of LA is telling internet and new media companies that they (we) no longer qualify for a previously extended city tax discount. (http://www.revenews.com/davidlewis/actly-and-the-california-affiliate-tax/).

    Apart from that, as David Lewis correctly observes, publishers that are terminated from affiliate programs can continue promote those retailers and their products and generate revenue by participating in the affiliate programs of comparison shopping engines such as Shopping.com's, PriceGrabbers and Shopzilla's.

    Business owners will likely response to lawmakers' shortsightedness with their feet (or mice) by moving their businesses to more tax friendly climates or revenue-generating programs that circumvent this issue.

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