Getting Ahead of the Advertising Tax

posted by jangro on Jun 29, 2009 @18:53:23 (2 years, 10 months ago)

Just when you thought it was safe, the Advertising Tax legislation came back out of nowhere a few weeks ago and appeared as line items in the state budgets for North Carolina, California, and other states. Both budgets are still pending, but this didn't stop Amazon from making good on their threat to drop all of their associates in North Carolina. It's not too late to act if you are from California or North Carolina.

Watching the publisher-residents of these states fight this legislation after it already has strong momentum has been both inspiring and disheartening. How legislators can propose and pass laws that destroy small business while the merchants that it targets can dodge it (by destroying said small businesses) is beyond me.

It is time to get proactive about this and send an email to my own state representative and senator, just in case they're considering the same in Massachusetts. Earlier this year I was worried that by doing so I'd be giving them ideas. But by now, they cannot have possibly NOT heard about the action being taken by several other states. I think it's riskier to remain silent.

I am yet to see any examples of letters sent to state reps in a preemptive manner. So I drafted one up. Please feel free to use this for your own state reps, though I encourage you to customize with your own story.

Subject: Advertising nexus laws and the risk to small business Dear Senator Eldridge, I am the co-owner of a small business in your district. My company employs 4 people in the state of Massachusetts. We publish websites that allow people to find, share, and discuss products that are available from e-commerce websites all over the Internet. We earn money through advertising on a performance basis, also known as affiliate marketing. We do not sell products. There are currently a number of states that are forming and passing legislation that targets this type of advertising in such a way that it establishes nexus requiring out of state merchants to collect sales and use tax from residents of those states. New York was the first and passed a law last year dubbed the "Amazon tax". There are a number of states in the process of doing the same, including Connecticut, North Carolina, California, Hawaii, and others. While I understand that states are in financial crisis and wish to require as many merchants to collect sales tax as possible, the basic flaw in this legislation is that the merchants can avoid it by terminating their advertising relationship with all publishers in the given state; they are doing this. The publisher businesses cannot avoid it; they get hurt, taxes don't get collected. For example: - Hundreds of advertisers terminated their relationship with thousands of New York state publishers when the law was passed last year. As a direct result of the terminated relationships, many New York publishers were forced out of business. - Dozens of merchants recently terminated relationships with Connecticut publishers based merely on the speculation that the legislation would pass there. - Just last week, Amazon terminated their relationship with all publishers in the state of North Carolina which has added similar legislation to their pending state budget. That letter from Amazon to NC publishers can be seen here: http://www.marketingpilgrim.com/2009/06/amazon-calls-nc-lawmakers-bluff-cancels-affiliate-program-early.html - Last week, Amazon followed through with their threat and terminated their relationships with Hawaii advertisers. The supporters of this legislation are rallying behind the idea creating a level playing field between online and offline merchants. And while "sticking it" to Amazon and other online merchants might seem like a righteous thing, it has been proven that it severely harms thousands of businesses like mine while the big merchants can avoid it. How can states pass legislation that will put their resident businesses at risk? Several states have realized that these new advertising nexus laws are not the answer to balancing their budget. States like Minnesota and Maryland, have realized the gains do not outweigh the losses. The income gained from the sales tax does not compensate for the loss of income tax from the small businesses which are forced out of business. Even if these small business owners can stay in business, their income is significantly reduced. Less income not only means less income tax, it means less spending, less investing, less growth. For the small business owner such as me, it could also mean cutting back on benefits and reducing the number of employees. All of this is detrimental to individuals and to our state. Small business owners are a critical part of our economy. If Massachusetts was to pass similar legislation, any of the dozens of merchants that advertise through us could terminate us based merely on the state that we operate in. Nearly 100% of our revenue comes from out of state merchants. This could put us out of business. There are thousands of individuals and businesses in this state with similar advertising models. This is a critical issue to my business. As other states have contemplated advertising nexus laws, publishers such as myself, have learned that many legislators did not realize the impact of the proposed legislation, nor did they quite understand our business. We have spoken before legislators of several states in both public sessions and private meetings. We have found it is more efficient to hold these meetings in advance of any proposed legislation. I would like to meet with you to discuss this issue further and will call to schedule a meeting. In advance of my call, your staff can contact me to schedule a meeting or for more information. I may be reached at 617-xxx-xxxx. Thank you for your time and I look forward to meeting with you. Sincerely, Scott Jangro President and co-founder MechMedia, Inc. Stow, MA

I'll follow up with my experience as I contact and hopefully meet with my representatives.

What do you think?
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Comments & Reactions

jangro saved this to Advertisingtax 2 years, 10 months ago
Posted by Posts about Daily Affiliate Marketing Hot Topics: as of June 29, 2009 | A New Affiliate Marketing Conference 2 years, 10 months ago

[...] places. But my profession as an affiliate marketer is under attack in many states and sadly many Getting Ahead of the Advertising Tax - jangro.com 06/29/2009 Just when you thought it was safe, the Advertising Tax legislation came [...]

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Posted by Ayako 2 years, 10 months ago

Hi,

Thanks for the great example. I think it is extremely important for everyone to learn more about this issue and be proactive!

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Posted by Merchants started booting affiliates | Branding100.com 2 years, 10 months ago

[...] Scott Jangro posted a great examples of letters sent to state representatives on his site here. If you are not sure what to write, his letter example should provide you a good guide because [...]

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Posted by Stephanie Lichtenstein 2 years, 10 months ago

Thanks for sharing your letters Scotty. I hope everyone takes your advice and writes a letter. The time to do something is now!

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Posted by OnuR 2 years, 10 months ago

thnx its nice.

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Posted by OnuR 2 years, 10 months ago

Nice

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Posted by Master Clease 2 years, 10 months ago

I think that's crazy...I don't understand the reason why amazon would drop the people from NC? Wouldn't that decrease their sales or something

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Posted by Getting Ahead of the Advertising Tax | AffiliateCarnival 2 years, 10 months ago

[...] Getting Ahead of the Advertising Tax [...]

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Posted by Affiliate Convention, Joan Rivers, Michael Jackson, and the Advertising Tax 2 years, 10 months ago

[...] Scott Jangro wrote a letter to his senator and state representatives trying to get ahead of any potential tax in Mass. [...]

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Posted by Affiliate Convention, Joan Rivers, Michael Jackson, and the Advertising Tax | Affiliate Marketing Blog by Shawn Collins 2 years, 10 months ago

[...] Scott Jangro wrote a letter to his senator and state representatives trying to get ahead of any potential tax in Mass. [...]

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Posted by Affiliate Convention, Joan Rivers, Michael Jackson, and the Advertising Tax | marketFly 2 years, 10 months ago

[...] Scott Jangro wrote a letter to his senator and state representatives trying to get ahead of any potential tax in Mass. [...]

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Posted by jeff 2 years, 10 months ago

How does Amazon know what state you are in? All they ask for is the Tax ID. Do they do it based on where the check is sent? If so, couldn't I just have my checks sent to my mom's house who lives in a different state?

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Posted by Affiliate Convention, Joan Rivers, Michael Jackson, and the Advertising Tax | Affiliate Marketing 2 years, 10 months ago

[...] Scott Jangro wrote a letter to his senator and state representatives trying to get ahead of any potential tax in Mass. [...]

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Posted by OnuR 2 years, 6 months ago

thnx its nice.

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Posted by meryem sahin 2 years ago

Thanks for the great example. I think it is extremely important for everyone to learn more about this issue and be proactive!
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Getting Ahead of the Advertising Tax

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