Stop AB 178 (the bad California Affiliate Bill)

Currently in the California legislative there is a bill that will force merchants to remove affiliates that live in California from their affiliate marketing programs.

You came here to learn the facts. This blog is about taking action and how you can help.

The situation

AB 178 would establish that California nexus is created when any out of state retailer enters into any marketing agreement with a California resident or business in exchange for compensation or commission, such as by a link, website, or otherwise, which generates referrals in excess of $10,000 in sales. Once nexus is established, AB 178 would require retailers that advertise and receive direct or indirect referrals from online advertising on websites to collect sales tax in California.

When New York State enacted such a bill, 69 retailers immediately severed their relationships with affiliates residing in New York State including Overstock.com and the Home Shopping Network.

We need to stop this legislation and we can! With the support of CalChamber and CalTax, California affiliate marketers and the PMA is launching a coordinated grass-roots campaign that targets congressional representatives. And this bill was killed last year by the CalChamber coalition. But this time opposition is even stronger and so we need to be stronger.

How you can help

We have attack plan that includes sample letters, fact sheets, congressional contacts by zip code, and a “Visit Sacramento” day, to put faces in front of decision makers.

Everything you need to make a difference is on this blog.

• Sign our group letter – we want over 200 businesses to sign this letter. Click here to see the letter and sign up (It's important we gather as many names, company names, as possible. We have made it easy. You just need to leave your name in the comments.)

• Write a letter to your State Assembly Member – this really does make a difference.

Sample letter to write your State Assembly Member here - make sure to personalize it

Find your State Assembly Member here by zip code

Assembly member’s address here - click on the Assembly Member's name, then find their contact info on their web page. Please sent your fax to their local office (not Sacramento). It's best to fax AND email.

• Join our lobby day in Sacramento on March 31. We need to put a human face to this story and the best way to do that is to meet with your Assembly members face-to-face. Brook Schaaf and Karen Garcia are organizing this. You can get in touch with them through their websites.

• Editorial board visits – you can twitter Lisa Picarelle here who is organizing it

For more information contact Beth Kirsch via twitter here.

THANKS FOR YOUR HELP. TOGETHER WE CAN STOP THIS

Group letter from all CA affiliates to the State Assembly

Hi all, to sign on this letter, in the comments please leave

1. Your full name
2. Title
3. Name of business
4. City location of your business
   

You must be a California business and/or resident to sign this letter. If you rather sign privately, please email the same information to caaffiliates (at) gmail.com

To: Members of the Assembly Revenue & Taxation Committee

HUNDREDS OF SMALL CALIFORNIA BUSINESSES WILL BE HARMED BY AB 178 (SKINNER and CALDERON).

WE OPPOSE AND URGE YOUR “NO” VOTE.

As small business owners within the state of California we strongly OPPOSE AB 178 (Calderon and Skinner). This bill, while well meaning, will serve to sever our relationships with out of state advertisers, reduce our revenue from advertising, and decimate our ability to sustain our online businesses.

We are hundreds of tax-paying entrepreneurs, small businesses, and nonprofits of all types across the state who own our own websites, including numerous websites that benefit consumers such as coupons and discount offers, children’s scholastic education, ways to be more green, consumer financial resources, online education, health and fitness information and much more. We survive from income we earn from out of state retailers who advertise on our websites, such as through banner ads and click-throughs.

AB 178 attempts to establish that a California nexus is created when any out of state retailer who generates in excess of $10,000 in annual referral based sales enters into any marketing agreement with a California resident or business in exchange for commission or other consideration. Once nexus is established, AB 178 would require retailers that advertise and receive direct or indirect referrals from online advertising on websites to collect sales tax in California.

WE VEHEMENTLY OPPOSE AB 178 FOR THE FOLLOWING REASONS

AB 178 will devastate our small, entrepreneurial businesses.
While the changes in AB 178 may seem like an extremely efficient way to assign California nexus to online retailers, it has a major fundamental flaw -- these retailers can counter by immediately terminating the marketing relationships that they have with many thousands of California’s small online advertising businesses.

When New York State enacted such a bill, hundreds of retailers immediately severed their relationships with affiliates residing in New York State, including Overstock.com and Home Shopping Network. In addition, this number is actually greater because there are many more companies that removed only NY State affiliates around this time but did not publicly give a reason, and privately, some affiliates were told it was the New York State nexus and tax issue. We estimate the total to be over 200 merchants that removed affiliates.

If this were to happen in California, there is little doubt we would lose our advertising relationships with our retailers. In this case, we will experience a significant loss of income and might need to cut jobs in our businesses.

AB 178 will create an uneven playing field for our businesses
AB 178 defines an Internet retailer’s affiliates within California as a “physical presence” or “nexus” — the U.S. Supreme Court’s standard on whether a state’s sales taxes apply.

However, Affiliate marketers DO NOT SELL for the retailer - affiliate marketers advertise. We do not own the customers, we do not transact a sale, we do not accept money for sales, nor do we deliver products or services to consumers. It is a relationship based on a type of advertising model designed to allow small business to display advertising on behalf of retailers, whom they normally would not have exposure to without with an advertising agency. In fact, the advertising we do for these merchants is no different than performance marketing on television, radio, print, and direct mail. We all create advertising and buy media.

Perhaps an example is the best way to explain this. Imagine for a second, a television commercial with an 800-number for consumers to call and order a product. If the television stations that plays the ad or the marketing agency that developed that ad is in California that does not create a nexus. However, under AB 178, someone who places pays for performance advertising on a website creates a nexus.

AB 178 singles us out, and this creates an extremely uneven playing field for us with other types of online and offline advertising. This will in turn, will reduce our ability to compete with other forms of advertising.

AB 178 will harm a growing sector of the new economy.
California plays a key leadership role in the technology sector and as new technology businesses develop, California has always led the way. The affiliate advertising model represents a new online economy that is different from traditional online advertising. . As our online advertising industry continues to grow, as it has grown in the past an average of 20+% year over year for the last five years according to eMarketer, this means new jobs here in California. The passage of AB 178 would stifle this growth, and result in the rapid reduction of new jobs in California.

AB 178 will threaten the livelihood of thousands of California small businesses, the backbone of California’s economy. We strongly urge your “NO” vote.

Thank you so much for signing this letter

Again, to sign on the letter in the comments please leave

1. Your full name
2. Title
3. Name of business
4. City location of your business

You must be a California business and/or resident to sign this letter. If you rather sign privately, please email the same information to caaffiliates (at) gmail.com

Sample letter to California Assembley Members on AB 178

{LETTERHEAD}

[Date]

The Honorable First Name Last Name
Member, California State Assembly
State Capitol, Room
Sacramento, California 95814

Subject: OPPOSITION to AB 178, as introduced , February 2, 2009

Dear [Assembly Member Last Name]:

I am a small business owner with a website, and I am in strong opposition to AB 178, which would require retailers that advertise and receive direct or indirect referrals from banner ads and click-thrus on websites, such as mine, to collect sales tax in California.

I am opposed to this bill because it would substantially harm my small business by reducing a large source of revenue that I rely on to survive. This revenue results from providing advertising on my website as part of an “affiliate” or “associate” program with out-of-state retailers.

We not a traditional affiliates or a commission sales force for these retailers. Rather we are paid for performance marketing companies. However, Affiliate marketers DO NOT SELL for the retailer - affiliate marketers advertise. We do not own the customers, we do not transact a sale, we do not accept money for sales, nor do we deliver products or services to consumers.

In addition, the advertising we do for these merchants is no different than pay for performance marketing on television, radio, print, and direct mail. We just create advertising and buy media. We are no different than an advertising agency that is paid on performance.

AB 178 singles pay for performance online advertising out and this creates an extremely uneven playing field for my business with other types of online and offline advertising. This will in turn, will reduce our ability to compete with other forms of advertising.

Insert something here about how you impact the local economy...create jobs, spend money locally, etc. And only use a good story. If you can't think of one, don't do it.

If online retailers believe that doing business with me will result in their having to collect sales tax on all California sales, they likely will sever ties with my business, putting the viability of my business at risk. Such was the case in New York State where Overstock dismantled its affiliates program and hundreds of other business followed Overstock’s example. This left thousands of affiliates – most of which are small- and medium-sized businesses with a major loss of income.

For these reasons, I respectfully oppose this legislation.

Sincerely,

Your Name
Your title
(company name it not on letter head)

Please note, this is just a guideline, you should write what you want. Just make sure to oppose the legislation and tell your assembly member why and how the bill impacts you as a small business.