Affiliate Karma

By: Brook Schaaf, Founding Member of Performance Marketing Alliance, Inc., and principal at Schaaf Consulting

First a recap on this bill – California’s AB 178, co-sponsored by assembly members Nancy Skinner and Charles Calderon, is an “Amazon Tax” that labels affiliates a tax nexus for the purpose of forcing out of state retailers to collect and remit sales tax to California. This bill is modeled after an existing New York law that passed last year.

This game is being played out in multiple states because state governments want tax dollars for online purchases. The state can only compel retailers to collect and remit this tax if the retailers have a physical presence, or nexus, in the state such as a distribution center, corporate office, or retail store.

A few key points:

• It will bring unfair hardship to the affiliate marketing space. As we saw in New York, merchants will avoid nexus by severing their relationships with California affiliates, thus depriving them of income.

• This is a misapplication of the law because affiliate marketing is a form of advertising and advertising is already established as not being nexus.

Unfortunately, the New York law has withstood one court challenge so far. That means that we have a lot of education to do outside the affiliate marketplace. This was apparent on our lobbying day in Sacramento on Tuesday, March 31. While the staff and assembly members we met with understood that small businesses in California would be hurt, they did not seem to fully understand what affiliate marketing is – in particular that it is a type of advertising.

The good news is that we made some positive strides toward defeating this very dangerous, unfair bill. See the Performance Marketing Alliance site to learn more about the legislative storm. But there is much more to be done. If you are involved in affiliate or internet marketing, you should keep abreast of what is going on in your state and stay in touch with your representatives. Our effort is making a difference and we need to carry it to other states.

Visit the Performance Marketing Alliance site to learn more about the devastating effects of Bill 178, and how you can help. Or reach out to me at Brook at schaafco dot com and let us know how you can support the efforts to stop this unfair legislation from being passed.

Thanks so much!

Note from Editor, Stephanie Agresta: The LinkShare Blog has a lot of good news and updates on this issue.  Including the fact that Maryland SB 1071 failed to pass.