[Georgie Peri]

Removal from the Fingerhut Affiliate Program

Dear Online Stores DB,

As many of you may be aware, the State of Connecticut recently enacted legislation amending the Connecticut Tax Law in an attempt to require certain sellers to begin collecting sales tax on all sales to residents of the State of Connecticut, effective April 1, 2009.

Fingerhut Direct Marketing, Inc. ("Fingerhut") has no tax nexus in any state other than Minnesota, the home of our corporate headquarters. Unfortunately, due to the new legislation, we now believe it prudent to discontinue our current relationships with our Connecticut based affiliates.

Accordingly, Fingerhut hereby terminates all affiliate agreements currently in place with affiliates who are legal or tax paying residents of the State of Connecticut, as of March 31, 2009, (the "Affected Affiliates"). Any money due to Affected Affiliates as of March 31, 2009 will be paid in the ordinary course. In connection with termination of these agreements, all Affected Affiliates should immediately remove and/or cease use of all references to Fingerhut in or on any of your affiliate materials.

We regret that Fingerhut has been put in this position and wish you all the best in your future business endeavors.


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And so .. it has started .. ugh :\

[Julian]

merchants must realise that if more and more states do this, then they will be kicking out affiliates from all over the country.

There has to be a better way for the merchants to handle this

[mailman]

We might have to move offshore!

[Julian]

Isn't New Hampshire a state that is tax free? that isn't far for me. Although I don't know if Vermont are considering this move

[Uncle Rico]

So if merchants keep the same strategy to drop affiliates in affected states, what is the future of affiliate marketing? You know that most states will have similar bills up for legislation soon and then what? Merchants won't work with affiliates in any of the 50 states? Would merchants actually go that route?

[CathyM]

Removal from the Fingerhut Affiliate Program

Magi, sorry to hear that. It's very bad news at a big picture level.

Merchants won't work with affiliates in any of the 50 states? Would merchants actually go that route?

Maybe some will drop their affiliate programs. I hope that most will not. Some will start collecting taxes. It is so unjust that affiliates are being used as the scapeboat by which states collect sales tax.

[mellie]

Have you asked Fingerhut for proof that the Governor atually signed the bill?

I suggest you call the Senate Clerk's office for up to date status of law. PM me for number (or get it from http://www.cga.ct.gov/sco/ )

[markwelch]

I'm confused because I thought the law had merely passed a single committee hearing in one of the two houses of the Connecticut legislature, and I wasn't aware that it was an "urgency" bill that would take effect immediately.

While Fingerhut could choose to terminate its Connecticut affiliates even before Connecticut enacts the law (indeed, even if the law is not enacted), this does seem to be premature. (Did Amazon send Connecticut a letter similar to the one it sent to the Hawaii committee, advising that Hawaii affiliates would be terminated and that Amazon would not collect Hawaii taxes even if the law passed?)

On the other hand, this might be a helpful signal for legislators in other states, who can see how quickly these unintended consequences squash their residents.

I certainly expect to see these termination letters coming out from merchants as each state enacts "Amazon tax" bills into law. If California enacts this law, I expect to receive several dozen termination letters (at least) and possibly several merchants setting up cumbersome paperwork similar to the system used by some merchants who retain their New York affiliates.

[mellie]

Mark, I think Fingerhut jumped the gun, that's why I suggested CT affiliates get clarification. Bill was filed with LCO and so far only has Committee approval. Not yet passed by Houses or signed by Governor.

[fingerhut]

Hi all,
On behalf of Fingerhut, I want to provide some context around our decision to terminate CT affiliates. Please know that it was not something that we took lightly. We were simply left with little choice given the circumstances.

The directive came down from our CEO once the following facts were presented by our Legal team:

1. The target date for the CT bill to take effect (pending legislative approval) is 4/1.
2. Even if the bill is passed after 4/1, merchants would be held accountable retroactively back to 4/1.
3. We are not currently set up to collect sales tax for any state other than MN (where we are located and therefore have nexus).
4. We are functioning on an antiquated platform that doesn’t allow us to easily charge tax at the state (let alone municipality) level.
5. It will take us several months to properly source and implement the required tax solution.

While we are certainly reprioritizing this now that these tax nexus laws appear to be snowballing, there is currently no estimate of when we will have one in place.

I sincerely regret that we had to make this decision again (we did the same last year with NY) and I understand the frustration affiliates like Magi are experiencing. It is always painful when a mutually beneficial relationship is severed. I hope that those impacted are willing reestablish a relationship once we have the proper technology in place.

Hopefully this helps shed some light on why this seemingly premature decision was made. I will check back over the coming weeks to try and address any questions you might have.

Thanks,
Bill

[markwelch]

Bill, thanks for quickly posting a reply on behalf of Fingerhut to explain this decision. I completely understand your decision process; as I mentioned above, I wasn't aware that the bill imposed an April 1 effective date.

I hope that Fingerhut is attempting to communicate with the legislators in states that are considering "Amazon Tax" laws. It would be especially useful for you to explain:
- the impact on your affiliates and other contractors in each state;
- the likely cost to implement a multi-state sales tax solution, especially if you must apply tax laws for many conflicting jurisdictions;
- the relative amount of affiliate-driven, internet-driven, and offline-driven orders. If you show that affiliate-driven orders represent only 1% or less of gross sales to each state, then legislators will understand why the use of such a small "hook" will result only in the termination of in-state affiliates and not the collection of sales tax.

Unfortunately, your post seems to imply that as more of these laws are passed, Fingerhut is planning to surrender and begin collecting sales tax, even without a multi-state solution. This is likely to help some legislators decide to move forward, believing that companies like yours will soon surrender and collect tax, despite the costs and burdens imposed by the current system, and despite the fact that these laws are unconstitutional. In other words, you're helping to prove that passing unconstitutional laws is an effective way for states to make money.

FYI, you might also want to provide some contact information so that members of this forum might be more likely to trust that you really are a representative of Fingerhut (and not just some guy who is pretending to have relevant knowledge and to work for Fingerhut).

[Haiko de Poel, Jr.]

Admin Note: user Fingerhut has not been confirmed as the AM of fingerhut.

-----------
Fingerhut,

email me: haiko/ a.t./ abestweb.com from your @fingerhut address to become verified, this process is to protect your brand and the affiliates.

[BurgerBoy]

Another clueless merchant.

No affiliates = no affiliate program.

[Greg Rice]

In the long run, merchants will likely have to collect taxes on all sales. After these states get away with this, they will be back for more $$. Since they can't manage a budget they can only then take more money from peoples' pockets. IMO, merchants may dodge the bullet, for now, by removing affiliates from states that impose the tax but before you know it all states will require this for all sales. When that happens, these merchants will realize they killed off their affiliate programs, and a significant source of income, and still have to collect and pay the sales tax.

[mayfly]

Originally Posted by Greg Rice

In the long run, merchants will likely have to collect taxes on all sales. After these states get away with this, they will be back for more $$. Since they can't manage a budget they can only then take more money from peoples' pockets. IMO, merchants may dodge the bullet, for now, by removing affiliates from states that impose the tax but before you know it all states will require this for all sales. When that happens, these merchants will realize they killed off their affiliate programs, and a significant source of income, and still have to collect and pay the sales tax.

Exactly. They are shooting themselves in the foot!

Removing affiliates really is not a solution unless merchants decide to shut down their affiliate programs entirely, which I don't see that be the case since affiliate programs have been approved to be the most cost effective marketing methods in the past and in the future.

Merchants should be ready to collect tax in all states. It's sad to say that, but better prepare for the worst.

[loxly]

Originally Posted by mayfly

Merchants should be ready to collect tax in all states. It's sad to say that, but better prepare for the worst.

I agree, however merchants need to contact the states that are passing these laws and tell them how their business is being negatively impacted and insist that the states simplify the tax codes AND provide tax tables that are able to be used by the affected merchants shopping carts. For some states it will take a very long time for the codes to be properly programmed into shopping cart systems. This is not a "flip the switch" kindof thing.

States that want their state taxes collected by merchants need to give them a way to do it and simplify the reporting process as well.

Plus backdating to prior to bills being put into law is unfair in all kinds of ways.

[Haiko de Poel, Jr.]

Admin Note: User fingerhut is confirmed as the AM, Thank you.

[KLevknecht]

Originally Posted by Julian

merchants must realise that if more and more states do this, then they will be kicking out affiliates from all over the country.

There has to be a better way for the merchants to handle this

I'm actually facing this same situation for the affiliate program I manage. I'm not sure what else I can do right now but remove the affiliates. Please know that I understand it is frustrating for affiliates, but it's equally frustrating for me. I have worked very hard to get our program off and running and done a lot of recruitment work, for me to have to remove affiliates because of these laws is killing me. I'm just not sure of alternatives to bring to my managers..

[Uncle Rico]

Originally Posted by KLevknecht

I'm actually facing this same situation for the affiliate program I manage. I'm not sure what else I can do right now but remove the affiliates. Please know that I understand it is frustrating for affiliates, but it's equally frustrating for me. I have worked very hard to get our program off and running and done a lot of recruitment work, for me to have to remove affiliates because of these laws is killing me. I'm just not sure of alternatives to bring to my managers..

I wonder what management will say when they have just a few affiliates that reside in the same state because everyone else had to be removed because similar tax laws that will no doubt follow NY, CA, CT, etc.

[loxly]

Originally Posted by KLevknecht

I'm actually facing this same situation for the affiliate program I manage. I'm not sure what else I can do right now but remove the affiliates. Please know that I understand it is frustrating for affiliates, but it's equally frustrating for me. I have worked very hard to get our program off and running and done a lot of recruitment work, for me to have to remove affiliates because of these laws is killing me. I'm just not sure of alternatives to bring to my managers..

Are your Connecticut affiliates selling $2k per year to Connecticut residents? That's what defines the nexus. And yes, you better be telling your managers that this is coming down the pike for all states that charge sales tax so you are effectively killing your affiliate program if you don't address it by charging sales tax or finding out more about the states involved.

[mellie]

One of the things you can do is consult a Connecticut Sales Tax Attorney once the law is passed. They will be able to explain the law and the way you can work within the law. If affiliates, merchants and networks work together there will be solutions.

You must have a qualified Connecticut Sales Tax Attorney to get accurate information. Make sure the Sales Tax lawyer understands affiliate marketing too. Don't settle for just any lawyer or accountant.

We are also working on other solutions.

[JohnNapoletano]

Hi all.

I just posted an update and call to action on a new post. Please please get involved now, I mean now as in 12 midnight or 8am in the morning. Read my post or PM me to help out and spread the word to as many CT affiliates as possible.

Connecticut Tax Bill -- CT Affiliates Take Action Now!

Thanks,

John