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  1. #1
    Analytics Dude Kevin's Avatar
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    Hey Networks: Rebuilding the Soap Box; or How 50 Fronts is Failure
    Many of you may remember me a raving maniac some 16 months ago when news of the Amazon Tax (sic) began to leak out from Albany, NY. Yes, we had ignored it for the most part when it was first proposed, but when our Governor slipped it into his budget items, we started screaming. Have a good long look at what we did here, and you'll see what I mean.

    So today, we find ourselves under siege in various states, and losing.

    Why are we losing? Considering everything that's been written on the issue here and elsewhere?

    Simple.

    As with anything else in affiliate marketing, we are splinter cells. 500 heads moving in 490 directions. True organization of the industry is too new and small to have a substantial effect. We can't get our message straight. And we haven't been able to rely on what should be, and MUST be our strongest voice: The Networks.

    Who else besides the networks has so much influence on both merchants and affiliates? Who else has EVERYTHING to lose when the wheels continue to come off because of inaction? No one.

    Merchants have other advertising channels.

    Affiliates can find other incremental income through various means (although, we clearly have the 2nd most at stake).

    But every network save Google is squarely in the crosshairs.

    So, here's what needs to happen. Our friends at the networks need to get together, and push the Streamlined Sales Tax. And they need to do it yesterday. Or today if the latter isn't possible. You cannot fight this fight on 50 fronts!

    Networks: Losing affiliates state by state will de-value this industry. We know that affiliate revenue is often misunderstood by merchants, especially the larger ones. As their enrollment declines, they may see some of those sales come in through other channels. It may look like affiliates are more of an expense than a qualified, profitable sales channel.

    But we know different. We know that pay for performance marketing is the BEST channel for driving new customers to storefronts. Managed correctly, it's the lowest cost of acquisition.

    The Streamlined Sales Tax is the ONLY solution we can truly count on to save this industry. We need to push it TODAY.

    And we need the NETWORKS to lead that charge.
    Kevin Webster
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  2. #2
    ABW Ambassador sjangro's Avatar
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    Let's talk about SSTP for a minute.

    I was under the (wrong, I guess) impression that SSTP would take affiliates out of the equation. My current understanding, thanks to Mellie on last week's AV call, Nexus is still required to require a merchant to collect tax and SSTP just makes it easier to collect with simpler rules and pay with online payment.

    So I guess then, with SSTP, a merchant might opt to collect taxes instead of dump a lucrative marketing channel (affiliates) for the states that pass these nexus laws. An improvement for sure, but the cure?

    You make a strong statement, "The Streamlined Sales Tax is the ONLY solution we can truly count on to save this industry. We need to push it TODAY. " Based on my own misunderstanding, I don't think many people get it enough to get behind it an push it. Getting my head around this is a top priority for me.

    As for your main point, I do agree that the networks are in the best position to lead the charge. They've been doing a lot to get the word out to their merchants and affiliates, but more will be needed.

  3. #3
    Analytics Dude Kevin's Avatar
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    Let's talk about SSTP for a minute.
    At the VERY least, let's do.

    An improvement for sure, but the cure?
    Great question. I think so. Having been there and done that, I feel it is. Maybe the whole thing is unconstitutional. To me though, the bigger question is, do we have time to debate that? I think we are unintentionally being devalued. As such, we need to pick the fight that "works".

    As for your main point, I do agree that the networks are in the best position to lead the charge. They've been doing a lot to get the word out to their merchants and affiliates, but more will be needed.
    Yes. They have been better this year. But I think they are pushing the wrong fight. None of the battles are easy. But some are easy to get a MAJORITY around. Let's fight the battle for ALL of us, not some of us.

    Thanks Scott. I appreciate you commenting. As you can see, most of the big players haven't, publicly. I have received exactly one message from a network, off ABW, on this. I think that they need to say and do something. They are our best bet.
    Kevin Webster
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  4. #4
    Believe knight01's Avatar
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    Without regard to the constitutionality of the states imposing the tax, there needs to be a reality check. The states, all of them, are under incredible budget strains. They simply can not pass up any opportunity to enhance revenue without raising individual or corporate income taxes. This is the impetus of the wildfire that is spreading across the country and attacking our industry.

    In a previous post I remarked to a user who said, 'they were going to get active when this came up in their state', that at that point it is too late. In fact we've already missed the boat with fighting the fire, we must now try to contain and direct it's devastation.

    SSTP - The least unacceptable solution. Merchants most realize at some point they will have two choices, close their affiliate marketing channel or collect sales tax. Having one standard to meet across state lines is significantly better than attempting to meet 45 different state requirements and worse yet trying to meet multi-jurisdictional tax requirements that may be imposed by individual states.

    Networks - all them, even those that are primarily CPA, should be blasting their users with information about the coming changes. Not piece meal, state by state. Not merchant by merchant. Their is no other way to reach the majority of affiliates. Not through a forum, not through an industry magazine article, not through a tweet, not through a convention. Most affiliates simply live in their own little world and know nothing of what is happening out side of it. The networks need to make a weekly update email, exclusively about the tax issue(s), to every affiliate in their network directing them to a page on their site with links to advocacy groups, updates on legislation and ways to get involved.

    Affiliates - First we've got to be made aware. As mentioned, of the thousands of people who will be effected by this industry change only a few hundred may even know what is happening and that it may happen to them soon. Second, re-active is a losing strategy. we must be making contact with state and federal representatives driving home a message that this is a 'real business' and it provides real income for thousands who will be effectively put out of business. This must be done not with rants and raves, threats and misspelled emails. Rather with an understanding of the position the with which the representatives are placed. We need to be a resource of information. We need to provide solutions to help them, not simply lambaste them.


    Merchants - They must communicate with their affiliates. In many cases they have a method of reaching out either through an affiliate control panel with messages or email contact to let more of us know something is afoot.
    Those large enough to be concerned with the issue need to be making press releases stating that their intention is to terminate any and all relationships with individuals of states that pass a nexus based tax law. This gives the affiliates something hard to hand to the legislators to show them passing the sales tax laws will not increase revenues. They must find another way as these companies are serious about not collecting tax in a myriad of jurisdictions and are willing to cut ties with citizens of their state if needed.

    Something is going to happen, the economic realities require it. What is going to happen is up to us as the affiliates, merchants and networks.
    Last edited by knight01; July 1st, 2009 at 01:00 AM. Reason: added merchant section
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  5. #5
    Advocate mellie's Avatar
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    While I support the SSTP it is more of a long term solution. It will take years for states to adopt all the changes they need to. NY estimated at least 10 years to implement necessary changes ( there are hundreds of tax codes that need to be amended.)

    The member states of the SSTP have all presented, or will present, resolutions calling upon Congress to accept the SSTP. If they pass it, the member states (19 full, 4 assoc) will be allowed to require tax collection between them. Congress may or may not pass it, resolutions have been presented in previous years.

    Points to note are that merchants will still need to go along with collecting. They just might opt to terminate affiliates as they have done in the past. (There would still need to be a nexus to require sals tax to be collected.)

    You're right Kevin, the state by state approach/solutions is not good, temporary partial solution at best. Selectively fighting in California or North Carolina while ignoring Hawaii, Rhode Island and other states will also not work.

    Lack of action by merchants, lack of communication by merchants should be noted by every affiliate. Late night terminations with the excuse of not knowing or being out of office are not acceptable.

    Networks and program managers need to assume a more active role in educating and identifying solutions, both long term and short term.


    Affiliates need to realize that this is not really just a "Internet tax issue". Examine the way it is being handled. See the lack of communication? The lack of concrete action? See how you can be terminated in the blink of an eye while unethical affiliates who violate TOS are given warnings prior to removal or while networks and program managers look the other way?

    Everyone has a role to play.

    We should all look at what we learned from last year. What changed? Did we handle it any differently?

    What I see makes me sad.
    Melanie
    President - Affiliate Advocacy 2008 ShareaSale Performance Industry Advocate Award, 2009 Affiliate Summit Pinnacle Award - Affiliate Advocate
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  6. #6
    Advocate mellie's Avatar
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    Quote Originally Posted by knight01
    ... What is going to happen is up to us as the affiliates, merchants and networks.
    That's for sure.
    Melanie
    President - Affiliate Advocacy 2008 ShareaSale Performance Industry Advocate Award, 2009 Affiliate Summit Pinnacle Award - Affiliate Advocate
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  7. #7
    ShareASale President/CEO and ABW Veteran Brian - ShareASale's Avatar
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    Kevin,

    I agree that a lot of work is still yet to be done but must say that as part of the Network group I've seen a lot of action from our group both solo, collaborative, and through notification of affiliates and merchants. I know that personally I've had to drop a number of other things just to focus on these tax issues... and I'm not the only one.

    I don't see the solution to this being the SSTP personally, I don't think it solves the core problem of nexus and where revenue should be sent. Until that problem is solved it will always be a battle. States are in a crunch and will fight each other for revenue.

    Personally, I don't think this will come to a head until there is a Merchant willing to stand up to the State and say "Nope, I don't have nexus".
    Thanks,

    Brian Littleton
    President/CEO - ShareASale.com, Inc.

  8. #8
    Analytics Dude Kevin's Avatar
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    And I don't feel that the networks have done nothing. It's definitely on the radar.

    The fact remains, however, that fighting it state by state is going to be an issue, at this stage. More should have been done last year, when the issue raised it's ugly head for the "first" time.

    I don't propose that you alone should be doing it, either. Nor do i propose that any network technically ran and hid.

    Unfortunately, I don't have an answer aside from the SSTP. Perhaps there is a more centralized way of fighting this on one front that won't take years.

    Fact is, we don't have years. We don't have much time at all.
    Kevin Webster
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  9. #9
    ShareASale President/CEO and ABW Veteran Brian - ShareASale's Avatar
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    I do think that networks in general realize the severity and time sensitive nature of the problem... I've had quite a few discussions with folks on what is being done in given states, etc...

    To be honest, I don't know that there is an option outside of fighting the individual battles with the individual states. Unfortunately, we are up against state legislators that have the impossible task of trying to bring giant budget deficits in order and who are being extremely aggressive in a lot of cases.

    We need to focus on the futility of these bills due to contracts being dropped, loss of jobs, loss of income tax revenue, etc... It has worked in a lot of States and there are a lot of representatives that agree with our point of view.

    I don't consider the fact that Rhode Island passed their budget bill to be a sign that we have failed.
    Thanks,

    Brian Littleton
    President/CEO - ShareASale.com, Inc.

  10. #10
    Analytics Dude Kevin's Avatar
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    The problem is that New York is bandying about a pretty big number as to how much revenue the tax HAS already created. I won't print it here as I'm still verifying the number, but I got it from a VERY reliable source.

    Once that number becomes public knowledge, even more dominoes might start to tumble.

    What do we do if this is open season in 30 more states soon based on revenue claims by NY? Do we have resources to target that many battles?

    As an aside, you know I value your opinion, as I do the opinions of many board members here. Thank you for your responses.
    Kevin Webster
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  11. #11
    ShareASale President/CEO and ABW Veteran Brian - ShareASale's Avatar
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    Even if NY puts out those revenue numbers, it isn't guaranteed that other States will see that as open season. There are a large number of legislators who see this as wrong or bad legislation either way.
    Thanks,

    Brian Littleton
    President/CEO - ShareASale.com, Inc.

  12. #12
    Analytics Dude Kevin's Avatar
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    There are a large number of legislators who see this as wrong or bad legislation either way.
    This is true. We have some in NY that see it that way as well. Just a governor that doesn't.

    At the same time, when we rely on local politicians, we get, well, local quality results.

    Right now, here in NY, our legislative house isn't in session. But not because of vacations, or session dates, or what have you. Rather, they're all pouting because they can't decide who should have the keys to the room. Literally, not figuratively. They are actually bickering about a set of keys, and have been for weeks.

    Those aren't the kind of people I want to trust my future to. Or ones that I think will listen to rational arguments.

    Then again, it might not be much better at the federal level.
    Kevin Webster
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  13. #13
    Believe knight01's Avatar
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    To follow up with my comment regarding networks. This is likely to be the one most important tools in making merchants and affiliates aware. Except for the independent programs every affiliate, regardless of size, ends up logging into a network to review their clicks and commissions.

    Quote Originally Posted by Brian - ShareASale
    I do think that networks in general realize the severity and time sensitive nature of the problem... I've had quite a few discussions with folks on what is being done in given states, etc...
    That is nice to know. I just logged into each network that I have access to. ShareaSale.com, Avantlink.com, CJ.com, ConnectCommerce.com (Google Affiliate Network), LinkShare.com. This being the 1st day of the month, you'd think many part time affiliates would be checking to see if they made anything last month and with all the recent action on this issue it would be a great time to reach out to them. Not one network had a mention of this on their landing / home page. Not one had a mention of it on their logged in landing page. Those that had a news/announcement section had no mention of the legislation.

    I know this is coming off as me trying to pick on the networks, perhaps even SaS. I am not. I'm simply frustrated that after all this time, the best we see from the people that have the best access to spread the news and raise awareness is the occasional email that a merchant will be terminating affiliates.

    I'd ask all networks to make a link on their navigation menu to direct merchants and affiliates to information about the tax issue. Create an announcement in your news area that can not be missed by members when logging in to drive awareness of what they can do and how they can get active in the fight against this.

    In the words of Ben Franklin: "We must, indeed, all hang together or, most assuredly, we shall all hang separately."
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  14. #14
    ABW Ambassador sjangro's Avatar
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    Quote Originally Posted by Kevin
    Right now, here in NY, our legislative house isn't in session. But not because of vacations, or session dates, or what have you. Rather, they're all pouting because they can't decide who should have the keys to the room. Literally, not figuratively. They are actually bickering about a set of keys, and have been for weeks.

    Those aren't the kind of people I want to trust my future to. Or ones that I think will listen to rational arguments.

    Then again, it might not be much better at the federal level.
    Sounds like maybe you're all better off with them locked out of the house.

  15. #15
    Analytics Dude Kevin's Avatar
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    Well Scott, they haven't done much to help me while they were in it, so....
    Kevin Webster
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  16. #16
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    Quote Originally Posted by Kevin
    The problem is that New York is bandying about a pretty big number as to how much revenue the tax HAS already created.

    Once that number becomes public knowledge, even more dominoes might start to tumble.

    What do we do if this is open season in 30 more states soon based on revenue claims by NY? Do we have resources to target that many battles?
    It looks like when the NY law was passed, it was already too late for Amazon to cancel it's NY affiliates to avoid Nexus.

    But was there a later chance (before 09 year started, or after 4 quarters etc.) for Amazon to cancel its NY affiliates and stop collecting NY tax?

    It looks like Amazon got really aggressive in it's stance with Hawaii,NC,CA etc. but if it had done it with NY it might have sent a pretty strong message?

  17. #17
    Advocate mellie's Avatar
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    Emuflies, it's not that simple to remove nexus. If Amazon were to remove us (NY Affiliates) today they would still have a nexus in NY based on sales from the previous 4 quarters. They would still have to collect the sales tax until at least there were 12 months without sales from NY affiliates to NY tesidents.

    (Someone else told me there are additional steps to remove the requirement to collect once nexus is established but I do not know what's involved besides a form/filing. Accountant or sales tax attorney could answer that.)
    Melanie
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  18. #18
    Analytics Dude Kevin's Avatar
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    As far as removing nexus, where I'm currently employed we collect sales tax in 5 or so states that we haven't had a sales rep in in years. It's too difficult (I guess) for us to bother challenging the nexus status.

    So we decided it wasn't worth it.
    Kevin Webster
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  19. #19
    Advocate mellie's Avatar
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    Don't wory about spilling the beans. The figures on the sales tax collected in NY as a result of redefined nexus are well documented in testimony presented in other states ($46 million last year estimated $62 million this year).

    At a meeting yesterday I learned that NY is very satisfied with the impact of the law. Sales tax revenue was up. By June 1 of last year, approximately thirty out-of-state merchants with no other nexus registered to collect sales tax. Apparently more merchants have since signed on and sales tax revenue is expected to surpass the $62 million.
    Melanie
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