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  1. #1
    ShareASale President/CEO and ABW Veteran Brian - ShareASale's Avatar
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    Legislative Update - Illinois
    Providing a legislative update here for the Affiliate Tax in Illinois.

    On Friday, the Illinois House passed a law (again) which would greatly harm Affiliate Marketers in Illinois.

    The amendment is here: Illinois General Assembly - Full Text of SB0352

    This is a so-called "Fix it" bill where the Illinois legislature attempts to correct problems with the bill that was previously ruled invalid by the Illinois Supreme Court. The Court ruled that the previous bill discriminated against Internet Marketing which is likely the reason that the new bill includes every other kind of marketing.

    The specific language that would affect Affiliate Marketers now revolves around the use of "promo codes or other methods" which is obviously very broad and does include things like print, TV, radio, planes with signs behind them, ... basically anything where the retailer can track where the purchase came from.

    If you do not like this bill, please consider helping us by joining or contributing to the PMA at PMA - The Performance Marketing Association

    Bold added by me to help see the damaging language.

    1.1. A Beginning July 1, 2011, a retailer having a
    23 contract with a person located in this State under which
    24 the person, for a commission or other consideration based
    25 upon the sale of tangible personal property by the
    26 retailer, directly or indirectly refers potential




    09800SB0352sam001 - 10 - LRB098 04568 HLH 59982 a

    1 customers to the retailer by providing to the potential
    2 customers a promotional code or other mechanism that allows
    3 the retailer to track purchases referred by such persons.
    4 Examples of mechanisms that allow the retailer to track
    5 purchases referred by such persons include but are not
    6 limited to the use of a link on the person's Internet
    7 website, promotional codes distributed through the
    8 person's hand-delivered or mailed material, and
    9 promotional codes distributed by the person through radio
    10 or other broadcast media.
    The provisions of this paragraph
    11 1.1 shall apply only if the cumulative gross receipts from
    12 sales of tangible personal property by the retailer to
    13 customers who are referred to the retailer by all persons
    14 in this State under such contracts exceed $10,000 during
    15 the preceding 4 quarterly periods ending on the last day of
    16 March, June, September, and December. A retailer meeting
    17 the requirements of this paragraph 1.1 shall be presumed to
    18 be maintaining a place of business in this State but may
    19 rebut this presumption by submitting proof that the
    20 referrals or other activities pursued within this State by
    21 such persons were not sufficient to meet the nexus
    22 standards of the United States Constitution during the
    23 preceding 4 quarterly periods.
    Thanks,

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

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  3. #2
    Affiliate Network Rep JCrooks - AffiliateWindow's Avatar
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    Illinois elected officials notoriously believe that businesses and residents will pay any price (tax) to remain in the state. History has proved that wrong!
    Jeannine Crooks - Always happy to share what I know! - Voted Best Network Rep 2013 & 2014
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  4. #3
    Affiliate Manager
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    Hi Brian,

    Thanks for sharing this.
    It could be argued that SAS is "indirectly" involved in all referrals via SAS.

    That would make ALL SAS transactions taxable in IL, regardless of the customer's location or merchant's IL nexus status. Then we're looking at potentially double taxation, which could be argued as unconstitutional (we collect tax for the ship-to jurisdiction AND IL wants a piece too?) <head-shaking>

    This makes compliance essentially impossible, short of dropping all related parties. But when the NETWORK is triggering nexus, merchants will be forced to do something.

    Will you relocate ShareASale if this bill becomes law?

    We need a national policy NOW more than ever -- letting states do this on their own is not good for commerce.

  5. #4
    ShareASale President/CEO and ABW Veteran Brian - ShareASale's Avatar
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    Carpeperdiem,

    I think you are misunderstanding the law a bit. There would be no double taxation in any scenario as the customer would need to be based in Illinois in order to have the tax be an Illinois sales tax. It is an effort to force the out-of-state retailer to collect tax on eligible purchases, not a method for double taxation.

    The location of the network is not important here either. ShareASale isn't likely to move but we are doing our best to work on this issue so as to defend the Affiliate Marketers in this State who will be possibly forced to move or drastically change their business.
    Thanks,

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

  6. #5
    Affiliate Manager
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    Quote Originally Posted by Brian - ShareASale View Post
    There would be no double taxation in any scenario as the customer would need to be based in Illinois in order to have the tax be an Illinois sales tax.

    Brian,
    I only have the text that you posted -- but my read on this:

    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 providing to the potential customers a promotional code or other mechanism that allows the retailer to track purchases referred by such persons.
    This doesn't make any mention of the customer - only if the affiliate/partner is located in IL.

    directly or indirectly refers potential customers to the retailer
    my read on this is any part of the transaction that directly or indirectly refers the transaction if the referrer is in IL.

    I am not a lawyer, but I have 30 years of contract reading experience.

    If this law passes and SAS is determined to be "indirectly" referring customers to the retailer, this would force all SAS transactions to pay IL sales tax, even if the merchant and customer are in other states. If merchant was in NY, and customer in NY and NY sales tax is collected by law, but SAS transaction triggered IL nexus, that would be double taxation. Most likely unconstitutional (US) but who has the $ to fight that?

    As a merchant, I can drop affiliates in states that do these idiotic type of things, but if the state considers a network to be "indirectly" involved, it's kinda game over. I sincerely hope I am misreading this.

  7. #6
    ShareASale President/CEO and ABW Veteran Brian - ShareASale's Avatar
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    Definitely would not be double taxation in this ...

    The law is about creating "nexus". When a company has nexus in a State, they need to collect sales tax on eligible purchases... the law is not about any single transaction.

    So - a transaction to a customer in NY would not be eligible here.
    Thanks,

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

  8. #7
    Affiliate Manager
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    Quote Originally Posted by Brian - ShareASale View Post
    The law is about creating "nexus".
    But that's not how the proposed section of this bill is written. It does not speak of the customer location or merchant nexus, it only identifies "direct or indirect" referrals. As I said, I hope I am simply missing the part of this bill that constrains the transactions to shipments to customers in IL.

    As i said, I hope I'm not reading this correctly or missing key parts.

  9. #8
    ShareASale President/CEO and ABW Veteran Brian - ShareASale's Avatar
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    There is a link to the full bill in my first post, but the entire section is an attempt to define the following:

    "Retailer maintaining a place of business in this State",
    3 or any like term, means and includes any of the following
    4 retailers:
    Thanks,

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

  10. #9
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    Merchants have already started discontinuing relations with IL affiliates so I would assume we are back to hell in IL again. Gotta move out of this state.

  11. #10
    ShareASale President/CEO and ABW Veteran Brian - ShareASale's Avatar
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    The Governor did sign this bill, and it is now law in Illinois.

    Again, if you don't like the result here - please consider helping us continue to fight this and other nexus bills throughout the country by joining the PMA at The PMA | The Performance Marketing Association

    We were successful in a lawsuit the last time around - see PMA v. Hamer - in both a circuit court and the Illinois Supreme Court.
    Thanks,

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

  12. #11
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    I'm just curious what's going on with the new law in Illinois? I only got booted from one affiliate program (Zulily on Shareasale) and this morning I received an email that I was re-accepted into the program.

    I've been waiting for the hammer to drop, but it has been pretty quiet.

  13. #12
    Newbie Carleenp's Avatar
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    Has anyone gotten dropped from Amazon yet because of this? I figured it would be pretty quick but my account is still active. I just took over a new site and would love to add Amazon to it, but I guess I'll wait and see since I assume they will be dropping affiliates again.

    Any plans to challenge this one since the last one was effectively challenged?

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