[markwelch]

I just received the attached letter which Amazon sent to California's governor and legislators today:

> "If this new tax collection scheme were enacted, Amazon would have little choice but to end its advertising relationships with California-based participants in the Amazon "Associates Program. * * * Thus, this provision would provide no new tax revenue collected by Amazon or others who sever their relationships with California-based [publishers] ...." <

[GENUWINE4532]

Hopefully this will make them see the light, all though knowing politicians, and especially the convoluted gov we have in Cali.

What a mess they've made, it seems like most of the time they just close their eyes and hope for the best and think very little through, and now it's the 11th hour and they are desperate.

[markwelch]

For those who might not find it convenient to open the PDF version of Amazon's letter to California's legislators, here is the complete text:

Originally Posted by Paul_Misener,Amazon

> June 22, 2009

The Honorable Arnold Schwarzenegger
Governor, State of California
State Capitol Building
Sacramento, CA 95814

The Honorable Darrell Steinberg
The Honorable Dennis Hollingsworth
The Honorable Karen Bass
The Honorable Sam Blakeslee

Re: Opposition to the New Tax Collection Scheme of AB 178 (Skinner)

Dear Governor Schwarzenegger, Senate President pro Tempore Steinberg, Speaker Bass, Minority Leader Hollingsworth, and Minority Leader Blakeslee:

Amazon.com respectfully opposes the new tax collection scheme of AB 178 (Skinner) and similar
nexus legislation because it is unconstitutional and would not be an effective source of revenue.

The U.S. Supreme Court’s Quill decision prohibits a state from requiring sales tax collection by
sellers that lack physical presence in the state. The approach of AB 178 is unconstitutional because it ultimately would require sellers with no physical presence in California to collect sales tax merely on the basis of contracts with California advertisers.

If this new tax collection scheme were enacted, Amazon would have little choice but to end its
advertising relationships with California-based participants in the Amazon “Associates Program.” (Participants in the Associates Program place Amazon advertisements on their websites, and then are compensated by Amazon for purchases made by visitors whom they refer to Amazon’s website.)

Anticipating imminent enactment of similar legislation in North Carolina, Amazon already has taken steps to close the accounts of North Carolina-based Amazon Associates, and we will no longer pay referral fees after this closure nor will we accept new applications for the Associates program from North Carolina residents.

Thus, this provision would provide no new tax revenue collected by Amazon or others who sever
their relationships with California-based advertisers, and any revenue estimates should take this into account. And, unfortunately, the approach of AB 178 would deny California-based organizations the advertising fees they currently receive from out-of-state retailers.

California instead could heed the direction of the Supreme Court, which said that out-of-state sellers may be required to collect only if states simplify and harmonize their sales tax laws. The well-established multistate Streamlined Sales Tax Project (“SSTP”) is the legally-permissible path for states to follow. The approach of AB 178 would undermine the purposes and viability of the streamlining effort and, thus, is opposed by the National Conference of State Legislatures (“NCSL”), the Council on State Taxation (“COST”), and the Business Advisory Council to the SSTP, all of which support SSTP instead.

In sum, Amazon.com respectfully asks that you oppose the new tax collection scheme of AB 178
and similar nexus legislation. Please let me know if you have any questions. I can be reached at {contact info}

Sincerely yours,
Paul Misener
Vice President for Global Public Policy

cc The Honorable Nancy Skinner; Members of the California State Senate; Members of the California State Assembly <

(I've added the underlining; I've removed Mr. Misener's phone number and email address from this plain-text version, since they would otherwise probably be picked up by spambots.)

[Eric Ewe]

Another fiasco..

I would not be suprised if affiliate start to incorporate in some state that is tax friendly, such as the credit card and banking companies that flocked to Delaware to reap the benefits there.

[GENUWINE4532]

Does anyone know if incorporation is a solution? If this tax passes and we set up a Nevada Incorporation, is that a loophole that will no longer make us California Affiliates?

[Markiphone]

Originally Posted by GENUWINE4532

> "Does anyone know if incorporation is a solution? If this tax passes and we set up a Nevada Incorporation, is that a loophole that will no longer make us California Affiliates?" <

This has been asked and answered at least a dozen times in the past few months (search for "address games" or "incorporate"), and the answer is always NO.

You "reside" in the states where you live; a corporation "resides" in every state where its employees work (with very limited exceptions).

You might avoid the impact of these laws by moving completely to another state. Playing "address games" or "entity games" will have no legal effect.

Merchants should NOT blindly accept address-change notices from affiliates in "Amazon Tax" states.

[Patrick Vesperman]

Nothing new here. Read the full article:
http://online.wsj.com/article/SB124579383785943841.html

Some people don't seem to see both sides of the issue:

"Ms. Skinner's chief of staff Frank Russo said the current laws are "manifestly unfair" because they put brick-and-mortar businesses at a competitive disadvantage. "The time is running out for tax avoidance schemes where companies purposely follow a business model that makes them scofflaws," said Mr. Russo."

[littleman]

At least its getting some attention.

[GENUWINE4532]

Here is a story posted on the NBC Los Angeles local news website regarding Amazon's decision, kinda puts Amazon in not the best light:

http://www.nbclosangeles.com/news/lo...fornia-jw.html

[littleman]

Its interesting, Amazon is a big fish, so it gets a lot of attention, but the smaller merchants, which are our bread and butter, are what's going to truly hurt affiliates. If the exodus is anything like NY than California based affs will be screwed. I've been talking to my wife, and if AB178 passes or gets into the budget I'm out of the sate. For what its worth, I'm a third generation Californian and love my state.

In the big picture, if this type of law pops up in a lot of states then it will probably kill the aff business all together.

[GENUWINE4532]

Originally Posted by littleman

Its interesting, Amazon is a big fish, so it gets a lot of attention, but the smaller merchants, which are our bread and butter, are what's going to truly hurt affiliates. If the exodus is anything like NY than California based affs will be screwed. I've been talking to my wife, and if AB178 passes or gets into the budget I'm out of the sate. For what its worth, I'm a third generation Californian and love my state.

In the big picture, if this type of law pops up in a lot of states then it will probably kill the aff business all together.

I'm with you, I will probably move as well, but this may spread all over eventually. And I don't use Amazon at all, I also use lots of smaller merchants and EPN, thank goodness there is still Adsense, no way they can touch that, knock on wood.

[littleman]

Originally Posted by GENUWINE4532

...but this may spread all over eventually.

I'm thinking Oregon--no sales tax, not likely to adopt an aff tax. Other safe states would be Alaska, Delaware, Montana, and New Hampshire.

[affiliatemanager]

Dear Affiliates,

Buy.com currently charges sales tax in the following states:

California
Massachusetts
Tennessee
New York

We just learned of termination letters sent out to CA affiliates (among others) and want to reach out to all CA affiliates and help. Since Buy.com's headquarters in located in CA, we have nexus and already charge sales tax for CA residents, therefore, we won't be terminating affiliate relationships in CA.

Please reach me directly - melissa@buy.com (melissa at buy dot com) if you have any questions!

Melissa
Director of Marketing, Buy.com
BuyTV Co-Host
949-436-6776

[markwelch]

Just a reminder that Amazon has unambiguously stated (as noted in the first and third posts in this thread) that it will terminate its "Associate Program" advertising relationships with all California web publishers, immediately upon enactment of this law -- which has just been approved by the California Senate (as noted in other discussion threads in the CAaffiliates sub-forum).

Also, because California is the largest U.S. state (by population), its $10,000 threshold is likely to impact more "mid-size" e-commerce merchants than identical laws (with the same threshold) in smaller states. This might result in termination of California publishers by some merchants who didn't terminate their advertising relationships with publishers in other "advertising-nexus tax law" states. The new language that expressly includes non-internet advertising (including print and broadcast) might also threaten to trigger the threshold for more merchants.

[davidh]

this provision would provide no new tax revenue collected

Not only would it provide no new revenue, but it would eliminate current revenue sources.... the sale taxes collected when the affiliate spends the money they are making, the revenue on taxed wages of employees of the businesses where that money got spent, the sales tax revenue on goods purchased by those people, on and on and on in a never ending cycle.

[Eathan]

Originally Posted by littleman

I'm thinking Oregon--no sales tax, not likely to adopt an aff tax. Other safe states would be Alaska, Delaware, Montana, and New Hampshire.

I have a circa 1900 farm house for sale here in Oregon, already wired for T1...

Originally Posted by markwelch

Also, because California is the largest U.S. state (by population), its $10,000 threshold is likely to impact more "mid-size" e-commerce merchants than identical laws (with the same threshold) in smaller states. This might result in termination of California publishers by some merchants who didn't terminate their advertising relationships with publishers in other "advertising-nexus tax law" states. The new language that expressly includes non-internet advertising (including print and broadcast) might also threaten to trigger the threshold for more merchants.

Mark is right. This passing in California would force many of us smaller merchants to take a harder look at our options where other states did not.

[MusiciansFriend]

Looks like Cali affiliates live to fight another day… from the SJ Merc News:

“…Discussion of more controversial proposals, including a $1.8 billion fuel tax overhaul and a plan to force out-of-state retailers like Amazon.com collect sales tax on online purchases, will continue this week. They were pulled from final approval Monday amid concerns from the governor's office…”

[isellstuff]

Amazon just wrote a letter to the California Board of Equalization stating that they would terminate 10,000 affiliates if any of the current four affiliate California nexus bills passed.

Here's the news link:
Amazon threatens to cut Calif. affiliates over taxes | Digital Media - CNET News

[markwelch]

And here's the full text of the letter written last week by Amazon's VP for public policy:

February 24, 2011

Sen. George Runner (Ret.) Member, Board of Equalization
State of California, 400 Capitol Mall Suite 2340 Sacramento, CA 95814

Re: Amazon Position on Sales Tax Nexus Bills

Dear Senator Runner:

Thank you for your recent request for information about Amazon.com’s position on sales tax nexus bills introduced this year in the California Legislature. This letter is our response; please feel free to share it with others as you deem appropriate.

Amazon respectfully opposes the new tax collection schemes proposed in AB 153 (Skinner), AB 155 (Calderon), SB 234 (Hancock), and SB 655 (Steinberg), because they are either facially unconstitutional or would construct Trojan horses for functionally identical unconstitutional regulation. Similar legislation in other states has, counterproductively, led to job and income losses and little, if any, new tax revenue.

The U.S. Supreme Court’s Quill decision prohibits a state from requiring sales tax collection by sellers that lack physical presence in the state. AB 153, AB 155, SB 234, and SB 655 are unconstitutional because they ultimately would be used to require sellers with no physical presence in California to collect sales tax merely on the basis of contracts with California advertisers. One prominent advocate of this approach concludes that it applies not only to advertising through in-state websites, but also to advertising via television and telecommunications providers, as well as through magazines and other publications. This conclusion is supported by the broad wording of AB 153 and the even broader wording in AB 155, SB 234, and SB 655. In addition, AB 155 contains provisions that also would run afoul California Constitutional case law and federal statute.

If any of these new tax collection schemes were adopted, Amazon would be compelled to end its advertising relationships with well over 10,000 California-based participants in the Amazon “Associates Program.” (Participants in the Associates Program place Amazon advertisements on their websites, and then are compensated by Amazon for purchases made by visitors whom they refer to Amazon’s website. Other online sellers have similar programs and participants, which are more generally named “affiliates.”)

The California legislature first considered, and actually passed, similar legislation in 2009. Amazon notified the governor and the leaders of the Legislature that we were prepared to terminate contracts with California-based Associates, but the governor vetoed the bill before that became necessary. Since then, three states (North Carolina, Rhode Island, and Colorado) have enacted legislation with similar provisions. (AB 155 includes provisions nearly identical to parts of the Colorado statute against which a federal court recently issued, on constitutional grounds, a preliminary injunction.) In these three states, Amazon has terminated its advertising contracts with in-state affiliates, and has collected no sales tax for any of these states, nor paid any referral fees since then to any in-state Associates. In addition, last month Illinois passed a nexus bill out of the legislature. Amazon has notified IL-based Associates that we will terminate their contracts if the governor signs the bill, and already the leadership of another state has invited Illinois affiliates to relocate there.

Thus, these bills would provide no new tax revenue collected by Amazon or others who sever their relationships with California-based advertisers, and any revenue estimates should take this into account. Of course, California consumers would still be able to purchase online at www.amazon.com from Amazon’s retail business, so these bills would only deny California-based organizations and individuals the advertising fees they currently receive from out-of-state retailers and, ironically, California’s general fund could suffer a net loss in revenue as affiliates pay less income tax or move out of the state.

California instead should heed the U.S. Supreme Court. A national resolution, involving tax simplification evenhandedly applied, is the legally-permissible path for states to follow. The approaches of AB 153, AB 155, SB 234, and SB 655 could be used to undermine the purposes and viability of the national streamlining effort and, thus, similar bills have been opposed by the relevant task force of the National Conference of State Legislatures, the Council on State Taxation, and the Business Advisory Council to the Streamlined Sales Tax Project (“SSTP”), all of which have supported SSTP instead.

Thank you again for your interest in this matter, and I respectfully ask that you oppose the unconstitutional new tax collection schemes of AB 153, AB 155, SB 234, and SB 655. Please let me know if you have any questions. I can be reached at [phone] or [email address].

Sincerely yours,
Paul Misener
VP for Global Public Policy

http://www.boe.ca.gov/members/runner...tor_Runner.pdf

[affninja]

Thanks for posting. I summarized the letter and forwarded it to the Assemblymembers. Urge everyone else to do the same!

[markwelch]

I'm surprised that I can't find this mentioned elsewhere on ABW (maybe I'm just not searching right).

My understanding is that Assembly Bill 153 (just one of this year's Affiliate Nexus Tax bills in California) is scheduled to be considered in a hearing by the Revenue & Taxation Committee tomorrow (Monday, March 7, 2011, at 1:30 p.m).

I certainly won't be surprised if the bill is "dropped" again (as it was in past years) shortly before the hearing. I believe that the PMA and several California web publishers are planning to attend and speak at the hearing.

The California State Assembly

One version of the legislative staff analyst's notes on the bill can be viewed at AB 153 Assembly Bill - Bill Analysis

There is a Microsoft Word version (which appears different) at http://totalcapitol.com/tools/downlo...ysis_id=229653

The California Board of Equalization's analysis of the bill is at http://www.boe.ca.gov/legdiv/pdf/0153ab011811stw.pdf

From the BOE staff analysis of AB 153:

"If the purchaser fails to remit the tax to California, and escapes sales or use taxation, a tax gap is created.

"It is estimated that this gap in California’s sales and use tax system costs the state over $1.145 billion in state and local tax revenues ($795 million in uncollected use tax from California consumers; $350 million from businesses)."

* * *

"In a purely static world (no behavioral changes resulting from the change in tax policy) with full compliance, we estimate that the proposed change would lead to a state and local revenue increase of $152 million in 2011-12 (a half-year effect) and $317 million in 2011-12.

"However, the State’s likelihood of actually realizing these revenues depends entirely on (1) Internet retailers’ (such as Amazon and Overstock) willingness to continue their affiliate programs, and (2) other retailers’ willingness to continue to sell on eBay and to fully comply with the added use tax collection obligations imposed by this bill. We have received direct confirmation from Amazon that it will terminate its relationship with its 10,000 California affiliates should this measure become enacted. We estimate that Amazon currently comprises roughly 50 percent of the Internet sales of large firms who currently do not have nexus in California. Consequently, the static revenue estimates cited above, adjusted for Amazon’s response, would drop to $114 million in 2011-12 and $234 million in 2012-13. If other firms were also to terminate their affiliate programs in response to the enactment of this bill, the potential revenue gain would be further diminished. Similarly ... any drop in such eBay usage would even further lower the revenue gain.

"Additionally, the termination of affiliate programs would have an adverse impact on state employment, which in turn would lead to lower revenues from sources such as the personal income tax and the corporation tax. The amount of these potential reductions is unknown."

(emphasis added)

[markwelch]

FYI: Many proponents of the "Amazon Tax" continue to argue that Amazon's plans to terminate its advertising relationships with California publishers, if the "Amazon tax" (advertising-nexus tax language) is enacted here, are "empty threats." (One recent example: last week, an American Booksellers' Association editorial described Amazon's clearly-communicated plans as "pure conjecture.")

Today, the governor of Illinois signed similar legislation into law, and already Amazon has sent notices terminating its advertising relationships with Illinois web publishers (Amazon boots all Illinois affiliates.). This isn't "conjecture" or an "empty threat" -- it's reality.

See also: Illinois Governer Decides to Sign Bill - ABestWeb Affiliate Marketing Forum