PMA Urges Patience and Coordination in Colorado Tax Fight
With the first round of the battle against the so-called Amazon Tax in Colorado over, Rebecca Madigan, Executive Director of the Performance Marketing Association contacted ReveNews in an effort to update readers on measures the PMA is taking in preparation as the focus switches to the Colorado Senate. The PMA is just one of many excellent groups, like Affiliate Advocacy, that is involved in the fight. We urge affiliates in every state to get involved with their industry groups and familiarize themselves with their local representatives.
What makes Colorado different than other states when it comes to the so called Amazon Tax?
So my background is not politics, but with all the grassroots battles we have fought in 2009 I’ve certainly learned a lot. The thing about Colorado that I haven’t seen in any other state is the political nature of this battle. Usually the thing that hits home and reaches state legislators is that these type of advertising tax bills will cost the state jobs. They will put small business out of business. And at the end of the day the State will still not collect any revenue from the tax. That message usually hits home.
They don’t seem to hear that in Colorado. In the House they kept saying over and over, “We have a budget shortfall and we need the money”. And they just don’t seem to hear the fact that there just won’t be any money. All they have to do is look at what happened in Rhode Island. Advertisers have control over their own business decisions and we saw almost 200 terminate relationships in other states. There is no reason why they won’t terminate in Colorado.
But what we’re seeing is this very coordinated effort by the Democrats, who happen to have control, in trying to push through all their tax bills regardless of whether the tax is sustainable, enforceable, or who it will hurt. Each individual bill doesn’t really matter to them I think. That’s my entire perspective from here, after getting beat down pretty hard yesterday (laughs).
The thing that we have to remember with politicians, the thing that I’ve learned, is that they always have some sort of higher purpose beyond the bill itself that they’re trying to achieve. In Colorado’s case the fight seems very partisan. Democrats have control of the House, the Senate, and they also have control of the Governor’s office. Bill Ritter, the current Governor, announced a couple of weeks ago that he’s not going to run for re-election. Essentially he is a lame duck governor. I think what we are seeing in Colorado is a very one sided push on legislation, sort of a rush to ram every bill through just in case the Democrats lose their majority.
On top of that, for a number of the House of Representatives in both parties this will be their last session. They are hitting up against term limits so we have a lot of lame ducks on top of the Governor. Because of that there was very little negotiation in the House from either Republicans or Democrats. Unfortunately as an industry we’re just getting dinged-up in the process.
How was the affiliate turn out during the House portion of the fight against bill 1193?
We had this amazing grassroots turnout against HB 1193 (pdf). We’ve had about 150 people actively writing letters, calling their legislators, and going to visit them at their office. We had 110 people show up at the Finance Committee Hearing last week. It’s been a tremendous show of force. I believe that’s going to make a difference. That’s the main tool that we have this tremendous grassroots participation and the citizens of Colorado showing up and expressing their dissatisfaction with this bill.
I have heard some express a little bit of frustration over lack of resources and coordination right now. Can you talk to that a little bit?
Yes, well…the PMA, as an organization, is trying to manage this, and it is taking up all of our resources, so yeah, we are a bit stretched. The issue that we face is there is a lot of activity going on in the background but we’re not necessarily telling the industry about it. That decision stems from counter-efforts we’ve been seeing from the American Booksellers Association (ABA) who are pushing heavily for this bill. For example, last week during the House hearing we heard testimony from a woman, the owner of a small bookstore, who testified she was advised by the ABA.
We had a similar problem in California. There we had a bunch of affiliates reach out to the blogosphere to say, “We need as many people as we can to show up in Sacramento.” We used the affiliate community and all the blogs in associated industries to coordinate our presence there. Sure enough, in Sacramento ABA representatives showed up (laughs). We had announced positioning in our statements on the blogs, that we’re small business, that we are not establishing nexus; we had all these very logical arguments why this law is a bad idea. The ABA went up after us with point by point counter arguments. Like they had prepped from our announcements.
So when I heard this woman mention them, I thought, “Oh no, here we are again. They’re already watching what we’re doing.” To counter that we’ve setup a registration form on the PMA site and we’ve asked people from Colorado to register with us so we can keep in communication with everybody via email only.
It is one thing to talk to the industry, to those involved on the ground, about the status of things; but what we don’t want to do is give the opposition the tools to out-maneuver us.
How will the House amendment attempting to “exempt” electronic affiliates impact matters?
It is a unique clause (pdf) that was negotiated at the House Finance Committee hearing. On the surface it looks like it is good for affiliates but in reality that’s just not the case. Based on the amendment, the House defines an affiliate as someone who makes a public referral to an online site or a face to face referral to an online site; specifically excluding an electronic solicitation of business.
Strangely that language essentially targets groups like the Boy Scouts, PTAs organizations, and churches who have web sites that have affiliate links as a way to raise money. I’m not at all sure about the political “logic” behind that (laughs).
But here’s the reality. By the nature of the industry model an advertiser does not know if an affiliate is physically directing traffic to their web site. They have no idea if they are referring business through online advertising or via face to face interaction. Rather than take the risk, advertisers will terminate if the bill passes.
This is particularly true in Colorado because of a particular clause in HB 1193 which is very unique. It essentially says the State has the ability to subpoena out-of-state advertisers believed to have nexus, and actually says that if they fail to comply those advertisers can be arrested. Now, there is plenty question as to the constitutionality and enforceability of that clause but ultimately advertisers are risk adverse. They will not take any chance at all and will likely terminate their affiliate relationships.
The “electronic” clause does not solve anything at all. It was a political move to pacify everyone in the room.
What is the next step in the upcoming fight in the Senate? What are some of the take-aways that we can learn from the loss in the House?
For each state that this comes up in we really need to understand what the political situation is and we need to make sure that our messaging reflects what we think might be successful with the political situation. We hope that other states aren’t quite as bad as Colorado because they’re in a real political battle that has, like I mentioned, nothing to do with the reality of the bills.
The fight in the Senate might be a little easier to manage. First of all there are fewer of them, which is helpful (laughs). Unlike the House, in the Colorado Senate there is a much lower percentage of Senators dealing with term limits, so they have re-election on their mind which is something we can leverage.
We don’t quite know what the Colorado Senate is going to do, what their next moves are, who the decision makers are going to be, or when they’re going to have testimony. So we’re in this waiting period right now. In the meantime we are leveraging the political advisors we have access to in order to determine how to approach individual legislators.
What groups is the PMA coordinating with in Colorado?
We’re working with this group of political advisors which includes a dozen or so political experts from a lot of different companies, some very large companies like Google, Yahoo, Amazon, AOL, Microsoft, and Apple. We’ve been able to work with them and synchronize lobbying efforts. And there are other associations that have to do with internet legislation that we have been working with, organizations like Internet Alliance, Tech America, and Net Choice. We are all trying to fight these bills, maybe for different reasons, but sharing our information is the most effective route.
What would you like to see from the grassroots groups that are trying to self-organize in Colorado?
The local groups are fantastic because, of course, they know who their peers are and how to reach them. It was the grassroots groups that actually found the 150 people who have been consistently participating. We’re trying to work closely with them to create tight coordination of our efforts. There are a couple of critical reasons why we need tight coordination. One is effectiveness. The more people we can get to be on message at the same time allows us to generate the more attention. It is very easy then to get the legislators to understand what we are talking about.
The danger is that if we don’t coordinate we risk the legislators getting confused, hearing different things that are not central to our argument, and causing them to fixate on things the opposition is saying.
For example, take North Carolina. That was a state where a similar law was passed. What we saw happen was that all of the legislators on both sides of the aisle, Representative and Democrat alike, became completely fixated on Amazon. The bill became all about “get Amazon, get Amazon, get Amazon”, and there was nothing we could do to convince them that there were small businesses that were being devastated in the process.
I am concerned the same thing might happen in Colorado if we don’t stay on point, if we don’t stay with really simple messages. There are probably a hundred reasons why this law is a bad thing, but we need to stick with 2 or 3 that we think will be meaningful and will change the minds of the legislators.
OK, so what are those 2 or 3 points?
Collectively with our lobbyists we are working to figure out what the vulnerable pieces are; where the opening in the armor is, if you will. In the House we thought small business and job loss should be enough but it wasn’t. What was really frustrating was that it wasn’t even raised by the Representatives who are supposed to be against this bill. So with this next round we are trying to figure out what is the right position.
It is something we will disseminate to the group soon. If local affiliates want to be informed we encourage them to get on our email list.
What can the local small affiliate who is worried about losing their commission, their business, and maybe their livelihood do to feel that they’re not just sitting and waiting for the other shoe to drop?
With this kind of a grassroots campaign where there’s already been a big push initially, it is common for participation to diminish quickly. It’s really hard to rally people. But here we have a core group that’s really excited, that wants to keep pushing and that core group is much larger than we’ve seen in other states.
Just to give you an example, in California there are 25,000 affiliates in the state and we got about 15 people to consistently help in terms of showing up in Sacramento (laughs). Thankfully they were a very efficient 15 folks. There are 4,200 affiliates in Colorado and we have 150 that keep pushing really hard. It’s great to see that kind of turn out.
Obviously they can write letters to the representative in their district (here is a list of Colorado Senate districts). We will be distributing letters specifically for Colorado that LinkShare helped put together.
Beyond that it is really important to coordinate the push. Our lobbyists have been speaking with Colorado Senators since Friday. They’ve worked all weekend gathering information. We will be coordinating a campaign this week specific to the Senate.
The upcoming hearing of the Senate version of HB 1193, sponsored by Senator Rollie Heath, is scheduled for Thursday, February 4th with the Senate Finance Committee which will start consideration around 9:30 a.m. It is vital that at this hearing we have a strong turnout.
What would you like to see advertisers do in terms of supporting Colorado affiliates in this fight?
I would like to see advertisers get involved and communicate with their affiliates as well as communicate with the Colorado State legislators. Advertisers can contact Senators directly or even better, have them work through me at the PMA and we can make sure information gets to the ears of the decision makers.
Is there anything else you want to cover in terms of messaging?
We need people to hang in there and keep fighting even if they are frustrated. This is definitely one of those marathon situations. There are so many analogies: this is a football game and we are only in the third quarter (laughs). If you live in Colorado and you haven’t heard what is going on you can register on the PMA website to get on our email list so you can hear blow-by-blow what we are doing to win the fight. We just have to keep working together and leverage the tremendous grassroots participation because I think that is going to be the most effective tool we have.
I want to thank Rebecca Madigan for taking time for today’s interview.
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Beth Kirsch
