[isellstuff]

Revenews is reporting that Governor Quinn has decided to sign HB3659?

Illinois Gov. Quinn Flaunts “Fairness” in Passing Nexus Tax, Cuts off Nose to Spite Amazon | ReveNews

[Rexanne]

So sorry for my fellow affiliates in Illinois. :-(

I am seeing the next "dot bomb" as the affiliate marketing industry. I called this about 4 years ago in a post on ABW - wish I wasn't correct. :-(

[sunshiner]

What a shame, who will be the next state or states to jump on this band wagon. Like economy isn't bad enough as it is.

[simcat]

Illinois Gov. Quinn Flaunts “Fairness” in Passing Nexus Tax, Cuts off Nose to Spite Amazon | ReveNews
The comment by Mike M. pretty much sums things up.

[markwelch]

Do we know what the "effective date" will be for this law? Has Amazon sent termination notices to Illinois web publisher yet?

Added: I think I've answered my own question: the enrolled version of the bill (which I believe is the version sitting on the Governor's desk) provides an effective date of July 1, 2011.

* * * Beginning July 1, 2011, a retailer having a contract with a person located in this State under which the person, for a commission or other consideration based upon the sale of tangible personal property by the retailer, directly or indirectly refers potential customers to the retailer by a link on the person's Internet website. * * *
http://www.ilga.gov/legislation/full...ID=10&Session=

The Illinois bill doesn't include any express "safe harbor" provisions, so it's unclear if the "New York Solution" might allow some merchants to maintain relationships with publishers in Illinois. (In New York and other states, the "safe harbor" was implemented by regulations or practice.)

[Kellie aka Ms. B]

Everyone should read ShareASale's response to the passage of this bill.

I know that Brian worked really, really, really hard (along with others) to fight this bill. Bless those who can sit face-to-face with politicians who have forgotten they are civil servants of their constituents and obviously have their minds made up from the get go about legislation.

There is some interesting information about some of the things that transpired prior to this bill being approved and the PR spin being put out regarding it's enactment (IMO pretty sickening spin).

[curt]

Yep, just got a notice from governor Pat Quinn that he signed it into law. Stupid maneuver by governor since affiliate partners are really nothing more than site owners selling ad space.

Illinois already raised state income tax by 60% for 2011 and now this! Stupid states expect everyone else to take pay cuts and concessions in labor unions and the state governments get to take more of our money and ruin our income sources.

The only ones benefiting from this crap is the huge brick-n-mortar corporations in Illinois. The rich seem to always maneuver the money cash flow to their advantage at the middle class and poor people's expense. Amazon.com will simply sever ties with the little people who offer ad space as affiliates.

[curt]

This is an attack on the middle class people because it doesn't really hurt big business. Amazon will drop us (middle class people with web sites) as affiliates. Illinois corporations get to stamp out the competition by eliminating affilliate ads so they make more money.

[PolkSDA]

Originally Posted by curt

Amazon will drop us (middle class people with web sites) as affiliates.

Already done. Just received in email:

Hello,

For well over a decade, the Amazon Associates Program has worked with thousands of Illinois residents. Unfortunately, a new state tax law signed by Governor Quinn compels us to terminate this program for Illinois-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by Illinois-based affiliates like you - even if those retailers have no physical presence in the state.

We had opposed this new tax law because it is unconstitutional and counterproductive. It was supported by national retailing chains, most of which are based outside Illinois, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that its enactment forces this action.

As a result of the new law, contracts with all Illinois affiliates of the Amazon Associates Program will be terminated and those Illinois residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, or SmallParts.com. Please be assured that all qualifying advertising fees earned prior to April 15, 2011 will be processed and paid in full in accordance with the regular payment schedule. Based on your account closure date of April 15, 2011, any final payments will be paid by July 1, 2011.

You are receiving this email because our records indicate that you are a resident of Illinois. If you are not currently a permanent resident of Illinois, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state after April 15, please contact us for reinstatement into the Amazon Associates Program.

To be clear, this development will only impact our ability to continue the Associates Program in Illinois, and will not affect the ability of Illinois residents to purchase online at Amazon.com: Online Shopping for Electronics, Apparel, Computers, Books, DVDs & more from Amazon’s retail business.

We have enjoyed working with you and other Illinois-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to Illinois residents.

Regards,

The Amazon Associates Team

[stremayne]

But can out-of-country merchants be forced to pay the tax if affiliates do not?

[markwelch]

Originally Posted by stremayne

But can out-of-country merchants be forced to pay the tax if affiliates do not?

The Advertising-Nexus tax language does not create a tax that "affiliates" would pay. It requires MERCHANTS to compute, collect, report, and remit SALES TAX from ALL customers in the state (not just customers or transactions "referred" by "affiliates"). The tax is actually paid by consumers (unless a merchant who was required to collect the sales tax fails to do so -- then the merchant might need to pay the sales tax from the merchant's own pockets).

I don't know how the Advertising-Nexus tax language would impact non-US merchants; it's possible that federal law or international tax treaties might supersede state law.

[Witzer]

Originally Posted by markwelch

The tax is actually paid by consumers

To me this is the important thing that most people are totally overlooking/misunderstanding.

Merchants have the hassel of collecting the tax. The consumer pays. The price of the goods rise by the percentage of the sales tax.

This is not a tax on the merchant or the affiliate. It is a tax on the consumer.

[Kellie aka Ms. B]

This is not a tax on the merchant or the affiliate. It is a tax on the consumer.

Yes, the consumer pays the tax, but the merchant who is tasked with tax collection assumes tax liability. The merchant gets the tax bill, whether paid by the consumer or not. The merchant is assessed any fees/penalities associated with the reporting (e.g. late penalties with filing, any interest assessed, if the State decides the filed amount is wrong the merchant pays the difference).

Of course there is the small matter that the Supreme Court has already said such actions by States are unconstitutional.

[delsol]

The incompetence of our politicians is revolting.

They are playing on peoples ignorance. I wrote a summary of this issue:
Affiliate Tax Bills Explained

Florida was my exit strategy.

All my compassion and best wishes of strength to the Illinois affiliates.

[bibby]

That's terrible!

[Gary-AvantLink]

Just throwing this out there, but has anyone noticed that the language in the bill says "Beginning July 1, 2011, a retailer having a contract with a person located in this State under which the person,..."

I put the bold in, because it is not true that Affiliates have "contracts" with merchants.

I certainly don't know if that matters, just an observation. Maybe Mark can comment on that...(?)

[AffiliateWarrior]

Gary - all affiliates are working under an "agreement" or "contract" with merchants - you're looking to split hairs there. I think Brian Littleton got it right in his post on the SAS Blog yesterday. It sucks to admit that the Fed intervening is a good solution for anything, but in this case - since the issue here is an interstate commerce issue is that the Fed needs to step up with a "Fair Tax"

These state laws are unconstitutional and stupid - they are doing way more damage than they are fixing anything, especially the budget gaps they are being purported to fix. But they are picking up steam and until they either get beaten in the courts or the Fed steps in, more damage will be done.

[markwelch]

Originally Posted by Gary-AvantLink

"...a retailer having a contract...

I put the bold in, because it is not true that Affiliates have "contracts" with merchants.

I certainly don't know if that matters, just an observation. Maybe Mark can comment on that...(?)

First, I'll remind everyone that I Am Not A Lawyer (any more).

Wade is correct: all of our advertising relationships are defined by contracts (agreements, terms & conditions), and there is absolutely no "loophole" to be found by pretending there isn't any contract.

However, the Illinois law specifically refers to a contract between two specific parties:

• a retailer (merchant/advertiser), and
• a "person located in this State" (publisher/affiliate).

The Illinois legislators were aware of "affiliate networks," including ShareASale (based in Illinois), and they clearly did not intend to put ShareASale out of business by asserting that any merchant who contracted with ShareASale was required to collect sales tax. Thus, the language requires that the contract be with a person "located in this state" and that the referral be from "a link on the person's Internet website" (referral links don't appear on ShareASale's website, but instead on websites owned and operated by other persons).

Gary does raise an interesting possible "loophole" -- if a retailer (merchant/advertiser) has no direct relationship with the publisher, but instead there are two separate contracts (one between the retailer/merchant/advertiser and the affiliate network, and another between the affiliate network and the web publisher ("affiliate"), then the merchant might be able to reasonably argue that the law doesn't apply since there is no direct contract between the retailer/merchant/advertiser and any in-state person. (You'd need to ask an Illinois attorney about how that state's courts would likely interpret this.)

However, no rational merchant should rely on this theory to retain advertising relationships with merchants in an "advertising-nexus" state, because the consequences are unacceptable: there could be huge legal costs to litigate the issue, and if the retailer loses, they'd need to pay the sales tax for all sales to in-state customers (remember, this isn't just for transactions referred by "in-state affiliates," it's for all transactions with in-state customers), plus interest and penalties. The merchant would be paying the sales tax out of its own pocket, since the merchant failed to collect the sales tax from the customer.

Of course, for merchants who aren't aware of the "advertising-nexus" issue, who fail to terminate their advertising relationships with Illinois publishers, this would certainly be a defense to be raised -- but only if there is no direct contract between the advertiser (merchant/retailer) and publisher (affiliate).

I suspect that one factor (in determining whether there is a contract between a retailer and an in-state person) might be whether the retailer/merchant/advertiser has imposed/asserted any special terms & conditions, different from the affiliate network's standard agreement.

I'll also point out that the law refers to "the person's website," which doesn't appear to be clearly defined -- but again no merchant could rationally decide to risk the consequences by trying to leave open a loophole for Illinois residents who post links on "other persons' websites."

[iluvchocolate]

All, my heart goes out to all Illlinois AM's - this bill is completely unfair and in the end will have a negative impact on the state's tax revenue.

I know a similar bill was enacted in NY. And similar proposals are being brought up in CA and MN. Are there any other state's with a similar proposal being brought up?

What can we do as affiliates to make our voices heard - even if our state is not currently in the crosshairs?

I am in Florida - and we are known for taxing tourists - but in these lean economic times - I wouldn't be surprised by anything.

I will snail mail/email/petition whomever we need to, to put an end to this. If everyone here at ABW and other AM forums band together - maybe we will be heard.

What's the plan we can all rally around to help stop this madness?

[Convergence]

Originally Posted by iluvchocolate

I know a similar bill was enacted in NY. And similar proposals are being brought up in CA and MN. Are there any other state's with a similar proposal being brought up?

What can we do as affiliates to make our voices heard - even if our state is not currently in the crosshairs?


I will snail mail/email/petition whomever we need to, to put an end to this. If everyone here at ABW and other AM forums band together - maybe we will be heard.

What's the plan we can all rally around to help stop this madness?

Hi iluvchocolate - luv your passion...

Here's a good place to start:

Affiliate Tax Laws - ABestWeb Affiliate Marketing Forum

[cowboysfan]

this is a freakin joke. i dont live in illonis...but with them doing this...i wonder how many more states will follow suit.
if there will be protests or anything, please let me know. all affiliates need to take action on this. i'll fly up to IL with my picket signs....our livelyhoods are at stake!

[arthurw]

I'm an affiliate in Illinois and this sucks.

I've been reading forums, comments and news articles about this these last 24 hours and a huge issue is that many people don't understand what's really happening. Many don't understand that Amazon can simply avoid collecting sales tax by terminating their affiliates. Many people think that affiliates are local companies that sell things on Amazon, while others write that affiliates should stop complaining and just switch to Wal-Mart and Sears who welcome the rejected Amazon affiliates (I can't as it's a totally different niche). It's a complicated thing to explain and I think that most who are for this new law simply don't fully understand its consequences.

I was watching local NBC news last night and they asked people on the street what they thought of now getting charged sales tax by Amazon (even though they won't!!) and they talked about CouponCabin who were threatening to leave the state because they apparently don't want to pay taxes (what? they HAVE to leave if they can't offer any more coupons!!) ... yet there is no mention of the 10,000 affiliates in IL who now have less income, or the fact that the whole bill is futile because merchants can just drop affiliates and avoid the whole thing.

The irony is that the signing of this bill kills job growth in the very industry that Quinn wishes to grow with his newly created Illinois Innovation Council (Illinois.gov - Illinois Government News Network (IGNN) - Search the News Results). Thank you Governor, for ruining my online affiliate business that I've spent years building. Talk about "fairness".

[cowboysfan]

we all have to fight back somehow, someway. illonis is home some of the best affiliates in our industry. this is just not an attack on IL affilates but an attack on us as a whole!

[happybell]

Is this just about the mailing address? I am assuming many affiliates are too small to have property for the business. I wonder if changing to a WI or IN address will change anything?

[AffiliateHound]

Originally Posted by happybell

Is this just about the mailing address? I am assuming many affiliates are too small to have property for the business. I wonder if changing to a WI or IN address will change anything?

That has been brought up time and time again in prior threads as the dominoes fall. There is a two-word term for what you describe: Tax Fraud.