Wednesday afternoon good news came from both Hawaii, and California:

Good News from Hawaii:

Governor Linda Lingle “vetoed HB 1405 because this legislation has immediate and adverse consequences for residents and businesses of Hawai’i. This legislation would place Hawai’i companies at a competitive disadvantage. As a consequence of this bill, Hawai’i businesses would no longer be able to receive commissions for advertisements on their website that link to numerous national and international firms that offer goods and services to Hawai’i residents” [more here | underlining mine].

Good News from California:

Governor Schwarzenegger believes that introducing such taxes to solve our state’s budget deficit is unacceptable. He announced: “After passing the largest tax increase in California history, it makes absolutely no sense to go back to the taxpayers to solve the current shortfall — that’s why yesterday I vetoed the majority vote tax increase passed by the legislature. With unemployment at an all time high, we should be doing everything we can to — keep jobs and create jobs — in California” [source | underlining mine]

Congratulations to Hawaii and California affiliates!!

I posted about the anti-affiliate North Carolina tax that is now in the works, and calls for the affiliate marketers to unite efforts in fighting this bill.

Today a worrying news came from the state of California. Bill AB 178 has been revived. In his “A Stake in the Heart of 25,000 Small California Businesses” article Allan Gray wrote this morning:

Earlier proposed legislation in AB178 was shelved in April. Now the State is getting desperate for money and clutching at straws, this legislation is being resurrected and may be squeezed into another bill.

The estimated additional income to the state is not likely to materialize. Worse than that, it could turn into a net loss for the state. The harm to tens of thousands of small California businesses, and a several large ones, could be irreparable. Collateral damage to other California businesses that support the directly affected businesses is also likely.

It’s time for California-based affiliate marketers to unite forces again. I am tweeting a link to this post to Governor @Schwarzenegger right after posting this. I encourage you to voice out your concern too, and contact your state representatives as well.

More on the importance of the subject and how affiliates can help in this situation:

• Meaning of CA Bill AB 178 for Affiliates
• AB178 Nexus Language Added to CA Budget Bill
• California Anti-Affiliate Advertising Tax Revived
• California Affiliate Tax Revived
• California Affiliates United to Stop AB 178

On Saturday (April 25), Melanie Seery posted an update on Minnesota’s affiliate tax bill, which was voted to pass earlier that day. On that same evening Minnesota Public Radio’s reporter, Tom Scheck, reported on Twitter that the “bill needed 68 votes to pass” and “DFL Rep. Tom Rukavina orally switched his vote at last minute to get the bill passed.” The bill now moves on to the MN Senate. More in Melanie’s post here.

Today, on the other hand, a good news came from California when Lisa Picarille, Revenue Magazine’s former Editor-in-Chief, tweeted:

We are awaiting for more updates from Lisa and other affiliate marketers that are fighting the bill in California, but Maryland’s precedent set two weeks ago is certainly encouraging to us all (more on the death of MD Senate Bill 1071 in Shawn Collins’ post here). So let’s press on, folks!!

Numerous concerned affiliates have been e-mailing me about the California online sales tax bill AB 178 asking for a concise clarification of what this situation really means for affiliates. I believe we should be looking at two sets of implications here: (a) the immediate (state-specific), and (b) the wider (nationally-spread) ones. Let’s briefly look at both:

Immediate Implications

If the bill becomes a law, merchants that do not wish to start collecting the additional tax will terminate California-based affiliates like Overstock terminated NY-based ones — as did CafePress, Footsmart, Jewelry Television, uBid.com and multiple other merchants — in May 2008 after the State of New York passed a similar law. This will cause thousands of companies to go out of business, and also lead to much wider consequences/implications (read on).

Wider Implications

These have already started revealing themselves. Other states (Minnesota, Hawaii, Connecticut, and Tennessee) are already looking into introducing the same tax. It is also being reported that a similar law is in the works in Illinois. The snowball effect is already obvious, and while Amazon chose to fight with the State of New York over the law that got the snowball rolling, they are already explicitly stating that they are not going to do the same in other states.

To gain further insight into the situation, please review the following links, and act:

• “How You Can Help” post by Brian Littleton
• “Next Steps for Merchants and Affiliates” post by Melanie Seery
• California Affiliates Forum at ABestWeb
• Campaign to Fight California Assembly Bill 178
• CA AB178 for Dummie GeekCast.fm podcast
• Google Opposes Proposed Sales Tax Legislation

This is your industry, and its future is very much in your hands now!

Yesterday, a friend and a known advocate of the affiliate marketing industry, Melanie Seery, posted an alert about California considering a sales tax similar to the one that got passed in New York last year. Melanie wrote:

California Affiliates had better get prepared, California Assembly Bill 178, co-authored by Charles Calderon (D) and Nancy Skinner (D) will be even more devastating than the NY bill. [full post here]

The existing law imposes a sales tax on retailers that are “engaged in business” in the state of California. The proposed one seeks to give a more narrow definition of a “retailer engaging in business in this state.” The new definition looks at a taxable retailer as:

…a retailer entering into an agreement with a resident of this state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link or an Internet Web site or otherwise, to the retailer, if the cumulative gross receipts or sales price from sales by the retailer to customers in this state who are referred pursuant to these agreements is in excess of $10,000 during the preceding 4 calendar quarterly periods, except as specified. [Bill text here]

As Melanie rightfully concludes such a “definition of nexus clearly includes affiliates.” It’s time for the affiliates that work in the tenth largest economy in the world to unite and do everything possible to prevent the passing of the bill.

Read more about the subject at:

• “Bill Number AB 178 Introduced“
• “California Affiliates Get Ready” blog post
• “California Affiliates” forum at ABestWeb

News coverage:

• “Avoiding sales tax online? Not for long” (ABC7)
• “Assemblywoman Skinner proposes sales tax for online retailers” (Oakland Tribune)
• “A Taxing Question” (Home Media Magazine)