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California Lawmakers To Stomp On Small Business Owners

by Missy Ward in Affiliate Marketing   &  , , , ,   24 Comments

Stomping On Small Business

Due to the extreme financial crisis that California is experiencing, Assemblymember Nancy Skinner (D) introduced new legislation earlier this year, designed to quickly get the cash needed to help make California whole again.

The pending legislation (Assembly Bill 178 or “AB 178”) calls for out-of-state companies (typically internet retailers) that maintain a physical presence in California to begin collecting sales tax on orders received from within California.

The problem with AB 178 is that it unjustly categorizes thousands of California’s small businesses that are involved in online advertising for the out-of-state-companies as the “physical presence” that California needs to assign the nexus.

The goal of AB178 is to increase state revenue and preserve California’s brick-and-mortar businesses and jobs by leveling the playing field against the competitive out-of-state online retailers. However, history has shown us that ultimately, thousands of California’s small businesses and residents will be significantly harmed.

Last year, the eerily similar “Amazon Tax” law was enacted in New York. Within days, the out-of-state retailers decided it was easier to terminate the relationships with the New York-based small businesses that were providing them with online advertising services instead of beginning to collect sales tax and file the related tax forms.

Many of the impacted small businesses were left with the choice to drastically alter their business operations including laying off employees, move out of state or simply close up shop. Any of these selections diminished the value of the increased sales tax that NY expects to garner.

Ironically, similar legislation is being entertained in Hawaii now as well. Amazon’s Vice President for Global Public Policy, Paul Misener has already indicated their intention to cease all relationships with the Hawaii-based small businesses providing online advertising services for them, should the law become enacted. (See page 6)

Minnesota, Tennessee, Connecticut, Maryland and North Carolina join California with similar legislation on the books. Illogically, all of these states are ignoring the U.S. Supreme Court decision of Quill v. North Dakota which ruled on the nexus issue back in 1992.

A hearing date for California Assembly Bill 178 has been scheduled for April 27, 2009 at 1:30 pm in room 126 at the State Capitol.

There is a lot that can be done to defeat this bill. However, the owners of California’s small businesses who stand to be affected must step up now. Reaching out to your Assemblymember is the most effective way to do so as they do listen to their constituents. It’s time to deluge their offices with all forms of opposition – whether by phone calls, letters, emails, faxes and visits.

It is with great hope that California votes NO on AB 178 after examining the ensuing effects that it will have on their own small businesses and residents.

As a driving force in the US economy, California has the opportunity to set an example to the other states entertaining this dubious legislation, that the State of California encourages and supports their local small businesses.

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Missy Ward

Co-Founder & President at Affiliate Summit, Inc.
Missy Ward has been in affiliate marketing since 1999. She is the Co-Founder of Affiliate Summit, FeedFront Magazine, GeekCast.fm, itsaWAHMthing.com; the Co-Publisher of Revenews.com, Founder of AffiliateMarketersGiveBack.com and manages many of her own affiliate sites. If she's not making money through affiliate links on the post you're currently reading, it's an oversight on her part and it will be corrected soon.

Comment & Add Your Voice

1 peter bordes April 13, 2009 at 11:39 am

FIGHT THE AFFILIATE ADVERTISING TAX http://blog.mediatrust.com/2009/04/internet-adver

affiliate marketing is being attacked and is a significant part of the performance marketing segment of our industry. The internet tax bill is structured so it can touch everyone in the industry who are part of the performance marketing ecosystem. affiliates, merchants,advertisers, service providers, search engine, ad networks etc all get hurt by these State tax Bills.

It is very important that the community understand the reach and gravity of this tax as it can literally wipe out 100’s of millions of dollars in industry revenue. it odes not create more tax. in fact it sucks more income out of our economy as all the big merchants are killing their programs in States that adopt the tax.

i hope everyone will help spread the word thru our industry and help fight this

Reply

2 peter bordes April 10, 2009 at 10:45 am

There is a very good chance this can be stopped. There is a need for more affiliates to get letters in and better yet contact their legislators. The meeting for the Bill has been moved to the 27th here is a great info post with all the tools and letters affiliates, merchants etc in CA can print out and get in.

http://www.performancemarketingalliance.com/2009/

There is a much bigger effort to get to this stopped. but we need to attack each State in a fast hard.There is info and tools on the Performance marketing alliance and Affiliate voice who have booth been working hard to get the troops coordinated and targeted with the info and tools.

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3 Missyward April 7, 2009 at 3:30 am

I can’t imagine that all of this won’t at some point go Federal, but in the meantime, thousands of small businesses will be affected while it all gets sorted out in the courts.
Oops…forgot to say great post! Looking forward to your next one.

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4 Missyward April 7, 2009 at 1:09 am

I can't imagine that all of this won't at some point go Federal, but in the meantime, thousands of small businesses will be affected while it all gets sorted out in the courts.

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5 james pickett April 6, 2009 at 10:02 pm

I wish there was something I could do to help myself… Noone wants the nation to be pushed back into their homes and stuck in their own regions… even if it is as silly as internet business.

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6 Missyward April 6, 2009 at 9:59 pm

I feel the same way. If this legislation passes in California, it will likely pass in the states I outlined above. I'm sure there will plenty of more states that jump on it as well. It could be disastrous to the internet marketing industry as we know it.

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7 Josh April 6, 2009 at 8:47 pm

Isn't it time to just include internet sales in taxable items? it's not like the internet needs help getting established anymore, and all the no-tax rule does is drive business out of state.

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8 Anita York April 6, 2009 at 8:09 pm

As a Calfiornia merchant, Geeks.com has sent our concerns to our state representatives and requested meetings to discuss AB178. While this will not impact us or our affiliates since we already charge California sales tax, we do see this as a dangerous precedent for the affiliate industry which drives considerable revenue to our Company which employs over 200 Californians.

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9 Brent Csutoras April 6, 2009 at 2:30 pm

Really amazed this is the first I have heard about this. Really hope people stand up and fight this as it will end up being a nightmare for anyone caught in the middle.

Thanks for sharing this and cross your fingers.

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10 @steveplunkett April 6, 2009 at 7:15 pm

good observations..

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11 james pickett April 6, 2009 at 6:50 pm

We will simply stop sales in Californa as well… What a terrible abuse of power. Seems like these laws are stomping on the American dream more than one specific state.

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12 Missyward April 6, 2009 at 9:57 pm

Then I will cross my fingers and keep shouting to make sure I do what I can to prevent AB178 from getting passed 😉

13 Kim Doyal April 6, 2009 at 6:40 pm

This is SO crazy! This state needs to learn to innovate and offer incentives to people who start small businesses which could in turn employ more people…..if I didn't have all my family & friends here I'd seriously consider moving.
Thanks for the info!

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14 Vlad Zablotskyy April 6, 2009 at 6:35 pm

I wonder if it isn't California that has the largest number of affiliates out of all states? I hope it will not pass, but remembering the New York fiasco, I would be preparing for the worse.

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15 Missyward April 6, 2009 at 9:55 pm

Basing it on the sheer size of the state and the 5 pages of cities that Linkshare alone outlined as potential business loss risks here: http://www.affiliatetip.com/LinkShare-CA-letter.p… I'd imagine that it does have the largest number.

16 Lisa Riolo April 6, 2009 at 5:29 pm

I've heard from several different sources that we have a really solid chance of defeating CA AB 178. This is one of those times you've got to take action and VISIT, or call or write. Face to face is best, but everything helps. Just let your representatives know how this will hurt your business. We are all counting on you!

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