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California Small Businesses Urge Governor to Veto Budget Trailer Bill

SACRAMENTO, Calif., June 20, 2011 — With 25,000 businesses at risk, members of the Performance Marketing Association are urging the Governor to veto ABX1 28.

Rebecca Madigan, Executive Director, Performance Marketing Association, stated, “This budget trailer bill, along with any other nexus tax legislation, will devastate a currently growing and vibrant segment of California’s technology economy, Affiliate Marketers.”

Similar legislation has been proposed in numerous other states, only to be rejected because those elected officials recognized these proposals do not generate any additional sales tax revenue and, in fact, harm small businesses.

ABX1 28 is just more of the same; it will simply not address the budget deficit because it will terminate their relationships with 25,000 California Affiliate Marketers, along with putting the growth of startup companies and venture capital projects at risk.

Keith Posehn, CEO, AppZorz stated, “Internet nexus tax bills, such at ABX1 28, needlessly endanger the growth of our state’s tech startup community; several investors we’ve pitched to during our fundraising have openly questioned the wisdom of staying in California.”

In 2010 Affiliate Marketers paid $151 million in state income taxes. If ABX1 28 passes, these small businesses will go out of business or move out of state to preserve their incomes. As a result, California’s current deficit and economic outlook will get worse.

“We hired 40 people last year and we had planned to hire another 25 people in 2011. We have stopped hiring until we know what will happen, but we are hopeful our Governor will protect small businesses like ours and keep Internet technology and innovation strong in California,” state Loren Bendel, CEO, Savings.com.

“We remain hopeful the Governor will recognize the potential legal flaws and the deceptive economic promises held within ABX1 28 and promptly veto this devastating legislation,” Madigan concluded.

 

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  1. Sorry Don, but that is garbage.

    I have been in affiliate marketing for 10 years, operate a dozen websites and am affiliated with a couple hundred merchants. While I do promote some products from Ca-based and national merchants, 90% of my business is through out-of-state merchants that only collect sales taxes in states where they actually have a physical presence. They will not follow the law, but rather do what they did in New York, Rhode Island, Illinois, North Carolina, and every state that passes an Affiliate-Nexus tax law – FIRE THEIR AFFILIATES.

    What also is overlooked is the fact the these laws are clearly unconstitutional as they are contrary to the ruling in the 1992 US Supreme Court decision in Quill v North Dakota, requiring an actual “Nexus” between the merchant and the state. The legal fiction that affiliate advertising of merchant products satisfies this standard is absurd. Litigation is pending in New York and Illinois, and will also be filed in CA if the governor signs the bill into law.

    FACT: When Colorado passed its Affiliate-Nexus tax law a year ago, they projected additional tax revenue of $5 Million. In the first year of the law, their actual revenue was $20,000. The net is a negative number when figuring in lost income tax and sales tax revenue from former affiliates who saw their income tumble, went out of business, or left the state.

    THAT is the reality of it.

    • R. Mitchell says:

      Hound is right. We lost our affiliation with Amazon.com when North Carolina went fishing with this legislation. We have been turned down by many others and they specifically stated North Carolina tax law as the reason.

      One was a valuable revenue stream we have had to do without, the others are additional funds that could have gone into the economy in North Carolina, but instead are going to other states.

      In the end, I believe this failure will lead the federal government to impost a nationwide sales tax on top of the individual state taxes. The bureaucracy and waste that will come with it will siphon off some of the funds and more money will disappear into the black hole of spending in D.C.

  2. Don says:

    The businesses that will no longer have affiliate status with some of the tax avoiding internet retailers clearly make most of their revenue from the tax collecting retailers that dominate their sites. At least on the sites I have checked most of the offers are from retailers that do collect and pay sales taxes from their customers when the sale is made to a California Resident. Those companies that make a significant income on affiliation with tax collection avoiders are parasites on our states economy. Good riddance and leave the state to those retailers who collect the sales taxes.