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Advertising Tax Impact Accomplishments And The Future

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Advertising Tax Impact Accomplishments And The Future

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Discussion on the Advertising Tax by industry leaders that have played a key role in organizing industry advocates and educating legislators on the impact of state tax nexus legislation.

Brian Littleton, President / CEO, ShareASale.com (Twitter @Brianlittleton) (Moderator)
Karen Garcia, Partner, GTO Management (Twitter @karengarcia)
Beth Kirsch, Volunteer, Performance Marketing Alliance (Twitter @bethkirsch)
Melanie Seery, President, Affiliate Voice (Twitter @mellies)

Discussion on the Advertising Tax by industry leaders that have played a key role in organizing industry advocates and educating legislators on the impact of state tax nexus legislation.

Brian Littleton, President / CEO, ShareASale.com (Twitter @Brianlittleton) (Moderator)
Karen Garcia, Partner, GTO Management (Twitter @karengarcia)
Beth Kirsch, Volunteer, Performance Marketing Alliance (Twitter @bethkirsch)
Melanie Seery, President, Affiliate Voice (Twitter @mellies)

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Advertising Tax Impact Accomplishments And The Future

  1. 1. Advertising Tax Impact, Accomplishments and the Future<br />Brian Littleton, President / CEO, ShareASale.com<br /> Karen Garcia, Partner, GTO Management <br />Beth Kirsch, Volunteer, Performance Marketing Alliance <br />Melanie Seery, President, Affiliate Voice<br />
  2. 2. What is the Advertising Tax?<br /><ul><li>It is an effort by states to collect unremitted sales/use tax from citizens by changing the definition of "nexus" to force e-commerce merchants to collect it at the time of purchase.
  3. 3. This is not a new tax...use tax in California alone has been a law since 1935.
  4. 4. Most people don't know it exists
  5. 5. States are looking for money
  6. 6. Collection of use tax by the current "honor system" doesn't work.</li></li></ul><li>What is Nexus?<br /><ul><li>Supreme Court case Quill Corp vs. North Dakota, 504 U.S. 298 (1992)
  7. 7. Examples of physical presence: </li></ul>sales people, company offices, distribution centers<br /><ul><li>New laws define affiliates as enough basis for physical presence despite the fact that they are not company employees</li></li></ul><li>Who Does This Affect?<br /><ul><li>Everyone.
  8. 8. Affiliates - coupon sites, bloggers, search, etc. Don't think you're not included, you are.
  9. 9. Merchants - You need to talk to a lawyer about legal ramifications of keeping your affiliate programs. Some of these bills are backdated and go into effect -before- they are actually signed.
  10. 10. Networks - make a percentage of affiliate sales, essentially a commission on the original purchase.
  11. 11. If you make a commission off of sales from an out of state company, you are affected.</li></li></ul><li>Why is it important?<br /><ul><li>According to Avalara, there are more than 12,500 tax zones in the U.S.
  12. 12. If a company does not want to collect the sales tax, they can simply remove affiliates on a state by state basis. </li></ul>No affiliates, no nexus.<br /><ul><li>Legislators fail to see the big picture: </li></ul>No nexus = no use tax collection AND <br />no income tax from removed affiliates <br />
  13. 13. Inaccuracies in the “News”<br />“Affiliates should pay taxes too.” Fox News reporter<br />“Why shouldn’t they pay taxes too?” CNBC reporter<br />“It’s about time they pay taxes too.”<br />It targets Amazon.<br />It’s a new movement. <br />
  14. 14. Inaccuracies in Politics<br />“Affiliates should pay taxes too.”<br />“I will be very surprised if any of the major click through retailers refuse to sell to our state…” Governor North Carolina<br />Affiliates/publishers/advertisers are the same as an affiliate company.<br />Internet sales tax levels the playing field.<br />
  15. 15. Myths & Inaccuracies in Our Industry<br />“This is a new tax.”<br />Collecting tax is easy.<br />“It’s just an advertising tax, a tax on the Internet, a tax on affiliates....”<br />“This is a Democrat thing.”<br />“This is a Republican thing.”<br />Quill vs. North Dakota is a good defense argument against the tax.<br />The tax is not constitutional.<br />The SSTP will save the day.<br />A defeated bill means you’re safe.<br />
  16. 16. Most damaging Myths & Inaccuracies<br />We can wait to act, the courts will decide.<br />We can’t do anything once the tax is implemented.<br />It’s not my problem. <br />“My state would never do that.” <br />
  17. 17. How a Bill Becomes a Law<br />
  18. 18. Legislative Campaigns<br />Where we can create momentum<br /><ul><li>Member visits in the district
  19. 19. Member visits/Lobbying Day in the Statehouse
  20. 20. Editorial Board
  21. 21. Letter writing
  22. 22. Group letters
  23. 23. Letters to the editor
  24. 24. Friendlies – Coalition building</li></li></ul><li>Following Legislation<br /><ul><li>Chamber of Commerce
  25. 25. State Taxpayer's Association
  26. 26. Your state website is a goldmine - many can actually RSS feed updates or allow you to sign up for bill tracking via email.
  27. 27. Networks - most now have informational pages available
  28. 28. PerformanceMarketingAlliance.com</li></ul> & AffiliateVoice.com<br /><ul><li>Forums
  29. 29. Affiliate Managers </li></li></ul><li>What To Say?<br /><ul><li>Affiliate Tax, Amazon Tax, Internet Retail Tax?</li></ul>Advertising Tax<br /><ul><li>The word "affiliate" means something completely different to legislators and Amazon alone is too confining and people like to see the big guy fall
  30. 30. Don't threaten to move out of state - it's an empty threat, they don't care
  31. 31. Keep your analogies as simplistic as possible
  32. 32. Don't get too technical or use acronyms - PPC, SEO, SEM mean nothing
  33. 33. Tell your story</li></li></ul><li>Accomplishments<br /><ul><li>California passed budget without Nexus language
  34. 34. Hawaii vetoed HB1405 and Amazon has reinvited affiliates there
  35. 35. Connecticut & Tennessee - postponed
  36. 36. Maryland & Minnesota - killed in committee
  37. 37. Affiliates, Merchants and Networks are more aware and are becoming proactive</li></ul>THIS IS AN ISSUE THAT WILL RETURN<br />
  38. 38. What Now? Reaction to Nexus Law<br />Once new nexus law is in effect, industry must continue to work together.<br />Networks, merchants and affiliates all have a role.<br />Action should not stop<br />
  39. 39. What Now? Reaction to Nexus Law<br />Role of Networks:<br />Education and dissemination of information.<br />Work to Identify Solutions<br />Action<br />Must be facilitators in recovery process.<br />Role of Merchants:<br />Education<br />Communication<br />Respect<br />Identify Solutions – Collect tax? Rebut the presumption?<br />Action<br />Role of Affiliates:<br />Preparation<br />Education<br />Communication<br />Respect<br />Identify Solutions<br />Action<br />
  40. 40. Solutions – What Works & What Doesn’t<br />Retain services of in state Sales and Use Tax Attorney<br />Understand the law (sales threshold, ability to rebut …)<br />Examine the NY Solution – Sample documents available to rebut presumption in NY <br />Do not use false address<br />Do not assume incorporating in another state will work<br />Do not follow advice of unlicensed<br />Do not follow advice of lawyer for other party<br />Do not try to circumvent the law, work within the law<br />
  41. 41. Specific Steps<br />Steps for Every Affiliate<br />Monitor, prepare, react and adapt<br />Steps for Every Merchant<br />Monitor, communicate and adapt<br />Steps for Every Network<br />Monitor, educate, disseminate, facilitate<br />
  42. 42. SSUTA and the SSTP<br />SSUTA = Streamlined Sales and Use Tax Agreement<br />SSTP = Streamlined Sales Tax Project<br />SSTP is the organization working to implement the SSUTA<br />Federal action<br />
  43. 43. Streamlined Sales Tax Agreement<br />“The result of this work is the Streamlined Sales and Use Tax Agreement. The purpose of the Agreement is to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance. The Agreement focuses on improving sales and use tax administration systems for all sellers and for all types of commerce through all of the following:<br />State level administration of sales and use tax collections. <br />Uniformity in the state and local tax bases. <br />Uniformity of major tax base definitions. <br />Central, electronic registration system for all member states. <br />Simplification of state and local tax rates. <br />Uniform sourcing rules for all taxable transactions. <br />Simplified administration of exemptions. <br />Simplified tax returns. <br />Simplification of tax remittances. <br />Protection of consumer privacy.”<br />Source : http://www.streamlinedsalestax.org/oprules.html<br />
  44. 44. Streamlined Sales Tax Project (SSTP)<br />Full member SSTP - A full member state is a state that is in compliance with the Streamlined Sales and Use Tax Agreement through laws, rules, regulations and policies. <br />Arkansas <br />Indiana <br />Iowa <br />Kansas <br />Kentucky <br />Michigan <br />Minnesota <br />Nebraska <br />Nevada <br />New Jersey <br />North Carolina <br />North Dakota<br />Oklahoma<br />Rhode Island<br />South Dakota<br />Vermont <br />Washington <br />West Virginia <br />Wyoming <br />Source : http://www.streamlinedsalestax.org/oprules.html<br />Associate Members SSTP - A state that is in compliance with the Streamlined Sales and Use Tax Agreement except that its laws, rules regulations and policies to bring the state into compliance are not in effect but are scheduled to take effect on or before July 1, 2009 or has achieved substantial compliance.<br />Ohio <br />Tennessee<br />Utah <br />Wisconsin <br />
  45. 45. SSTP is Not Ideal<br />Though simplified, compliance requires effort.<br />The Pros & Cons<br />One tax collection per state, states will distribute to local.<br />Still different rates in different states.<br />Same items must be taxable.<br />Takes years to implement all necessary changes. May not be practical in some states. <br />Time and difficulty.<br />Still a challenge for small to medium size merchants.<br />If accepted by Congress today, 23 states will require out of state merchants to collect & remit sales tax. <br />We are not ready.<br />Does NOT answer or solve “What is a nexus?”<br />

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