On Friday the Governor of California, Jerry Brown, signed AB 155 — “a statute that repeals the Affiliate Nexus Tax law for one year” [source]. I tweeted about it on Friday, and also retweeted the news on Sunday, receiving an immediate question (a very good question): So what’s next?
Well, let’s rewind things back 3 months, and look at the whole chronology:
- On July 29, 2011 Governor Brown signed “the online sales tax law, AB 28 1x” the essence of which was “to seek to force online retailers who have no physical presence in California”, but receiving sales’ referrals from California-based online affiliates, to collect sales tax [more in this Los Angeles Time article].
- The expected aftermath immediately followed, and tens of thousands of California affiliates were terminated from multiple affiliate programs including, but not limited to, Amazon’s Associates Program (as well as affiliate program is its subsidiaries Audible.com, Endless.com, Zappos.com, 6pm.com, etc) and Overstock.com’s affiliate program [more here].
- Performance Marketing Association, as well as Amazon, start working on changing things. On July 11 Amazon filed a petition for a referendum in California seeking 500,000 signatures of California voters to repeal the new law [more at TheStreet.com].
- In the meantime, some continued to misportray who affiliates actually are, and how/why they make their money [more here].
- On September 8, 2011 Amazon.com cut “a tentative deal with legislative leaders … that would allow it to postpone collecting sales taxes from Californians for another year”. Everyone looked towards Governor Brown “whether he would support the deal” [more in Los Angeles Times].
- On September 23 Gov. Brown signed the above-quoted bill AB 155 into law, giving “25,000 web-based entrepreneurs” hope “to get back in business” [more here] while everyone works with Congress on a federal level solution, also known as the Main Street Fairness Act, by July 2012.
- If the federal legislation is not in place “by July 2012, the original terms of ABX1 28 will be reinstated” [more at Blog.FedTax.net and at ReveNews.com]
As mentioned in an interview I had in the Spring of this year — when asked how I “think the tax legislation will play out” — “I believe we’ll continue seeing new affiliate nexus bills proposed nationwide (most states still face bad budget shortfalls), affiliate marketers fighting for their jobs (winning some battles, and losing others), and only a carefully weighed federal solution can put a period in the sentence”.
11 thoughts on “What California Statute AB 155 Means for Affiliates”
I think the chances of getting the Federal Law passed within a year is a long shot. I wish it wasn’t but look at what it takes to get the darn budget passed. I think Gov Brown will extend this bill and it will remain the elephant in the room for California affiliates. In the mean time, the strong affiliates will leave the state.
I do think this is a good presedence for other states to see the nexus tax just don’t work. Too bad it took a huge corporation to be impacted and finally speak up before the point was heard.
I agree with you there, Stephanie. On all points. Thank you for taking the time to comment.
Great summation and I agree with your points, particularly the ability for a federal solution to be achieved by the deadline of July 30, 2011. I believe Amazon is sincere in their statement that they’ll lobby for a federal solution – they don’t want to be the only online retailer collecting sales tax. They appear to have joined forces with big box retailers like Walmart, and I think that had to happen before we’ll see any progress on federal legislation.
The deal in California is a mixed blessing: we’re happy for the 1 year reprieve but we really need this law to be killed outright. The language in the law regarding the federal solution is rather ambiguous, which I hope means we’ll be able to continue to fight for outright repeal, or at least an extension so that there’s time for a true constitutional solution to be found. The PMA will be lobbying very hard this coming year to make sure affiliates get more than the 1 year reprieve.
Performance Marketing Association
Rebecca, thank you for taking the time to chime in. I didn’t know some of the things you’ve mentioned (e.g.: Amazon joining forces “with big box retailers like Walmart” to lobby). Best of luck to the PMA (and you personally) in the year to come. Keep up the good work!
CA affiliates are still pretty much in limbo. So far, I have had one merchant reinstate CA affiliates, and amazingly Amazon has yet to do so.
The passage of a national internet sales tax is a pipe dream given present-day politics. I have discussed the issue with various politicians at both the state and federal level, and they all nod and agree that it is a problems, and go on their merry way. I spoke to a member of the CA congressional delegation 10 days ago and she did not know that there was a bill pending in the Senate for a national internet sales tax, and she asked me to forward details and information to her. No response from her since. Same with several CA state senators and assemblypersons I have talked to – neither they nor the media seem able to grasp the Affiliate-Merchant relationship concept and they assume it’s a given that states can circumvent Quill v North Dakota and impose the taxing requirement on out-of-state merchants.
While it may appear to the community at large that Amazon gave in, nothing in their agreement with CA prohibits them from fighting their legal battles in other states, and unless at some point there is federal legislation, the issue will ultimately be decided in the courts.
The lack of legislators’ education is amazing. One would think that with the problem being so widely-spread, more of them would at least “do their homework”. In less than a month PMA is putting together a one-day Sales Tax & the Internet conference (in Washington, DC) targeting specifically people outside our industry (“Internet and tax attorneys, accounting professionals, state and federal policy makers”) — to raise awareness, and “break through the hype surrounding Internet tax laws”. It’s good to see them doing it. I hope to attend the event, and maybe live-blog from it. We’ll see…
So what happens after a year?
That (for the most part) was what the post was about. 😉 If no federal legislation is put in place, then the taxation bill/law returns (unless, as Stephanie has mentioned, Governor Brown extends the bill).
The one key change in AB155 over AB1x 28 is the threshold of $500,000 in sales to CA residents for the law to apply to a specific merchant is raised to $1,000,000.
Also, the legislature can see the error of its ways and either further extend the date, or repeal the whole thing.
It is a sad situation that small up-and-coming website owners such as myself who rely on the affiliate income we can sometimes muster up essentially don’t have a voice. But if it takes the big guys with deep pockets to get this bill killed off once and for all then so be.
I personally am abit hesitant to engage fully till this bill is permanently gone. One year is not a lot of time to hang one’s hat on.
Thanks for summary Geno.
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