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Advertising Tax: What Happened and What’s Next


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An overview of the status of state advertising tax legislation, what to expect going forward, and how to fight it.

Wright Andrews, Partner, Butera & Andrews
Bennet Kelley, Founder, Internet Law Center (Twitter @internetlawcent)

Published in: Business, Technology
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Advertising Tax: What Happened and What’s Next

  1. 1. Advertising Tax<br />What Happened and What’s Next<br />Bennet Kelley Wright Andrews <br />
  2. 2. Prologue : Deficits and New York<br />Part 1: Amazon Wars<br />Part 2: What’s Next<br />
  3. 3. The Panel<br />
  4. 4. Wright Andrews<br /><ul><li>Founder – Butera & Andrews
  5. 5. Chief Legislative Asst. Sen. Sam Nunn
  6. 6. President of Amer. League of Lobbyists
  7. 7. Top 50 LobbyistsWashingtonian Magazine</li></li></ul><li>Bennet Kelley<br /><ul><li>Founder – Internet Law Center
  8. 8. AGC, Director of Gov’t Affairs – ValueClick
  9. 9. Nat’l Co-Chair -- DNC’s Saxophone Club
  10. 10. Co-Chair -- Cal. Bar Cyberspace Comm.
  11. 11. Regular contributor to Huffington Post, Politics Magazine and Santa Monica Daily Press</li></ul>Began career with one of Washington’s top lobbyist<br />
  12. 12. The Context<br />
  14. 14.
  15. 15.
  16. 16. HURDLE #3<br />Internet Industry Assn Warning<br />The inability of the industry to engage in policy issues with anything more than loose coalitions and ad hoc committees has left the industry vulnerable to stronger and well-organized competitors who are better able to work together to achieve policy goals.<br />
  17. 17. K Street Gap<br />AT&T, Comcast Rout Google<br /> In “Net Neutrality Battle” (7/20/06)<br />AT&T <br />LOBBYING<br />DOLLARS <br />PER $1 <br />SPENT BY GOOGLE<br />
  18. 18. Meet the 800 Pound Gorilla At the Center of the Tax Debate<br />
  19. 19. RED SKY AT MORNINGFY ‘10 Deficits as Pct of FY ‘09 Budget<br />50% <br />LARGER<br />THAN 2009<br />38 States over 10 pct<br />
  20. 20. FYE 2011 IS PROJECTED TO BE EVEN WORSE<br />
  22. 22.
  23. 23. The New York Law<br />
  24. 24. U.S. Constitutional Limitations<br />Quill Corp. v. North Dakota(1) – Due Process and Commerce Clauses limit state taxing authority to entities with a physical presence in state.<br />Borders Online, LLC v. State Bd. of Equalization(2)- Borders Online subject to sales tax since it was merely agent for Borders brick and mortar operations.<br />504 U.S. 298 (1992)<br />29 Cal. Rptr. 3d 176 (Cal. Ct. App. 2005)<br />
  25. 25. NY’s Amazon TaxNew York Tax Code Section 1101(b)(8)<br />New York Affiliate Sales Tax “Amazon Tax”<br />Seller of tangible or personal property subject to sales tax if:<br />the seller enters into an agreement with a resident of this state under which the resident, for a commission or other consideration . . . refers potential customers, whether by a link on an internet website or otherwise, to the seller, if the cumulative gross receipts from sales by the seller to customers in the state who are referred to the seller by all residents with this type of an agreement with the seller is in excess of [$10,000] during the preceding [four quarters].<br />Remember to call my accountant<br />
  26. 26. A Pot of Gold?<br />$68MM<br />$68MM<br />NY: FY 2010<br />$61.3MM<br />NY: FY 2009<br />NY: INITIAL PROJECTION<br />$50MM<br />
  27. 27. Or Fool’s Gold?<br />Publishers Terminating NY Affiliates<br />
  28. 28. Amazon Complaint v. New York State Dept. of Taxation & Finance, No. 60124/08 (Jan. 12, 2009)<br />The New York law:<br /> requires a substantial nexus between an out-of-state seller and New York through a contract to pay commissions for referrals with a New York resident along with realization of more than $10,000 of revenue from New York sales earned through the arrangement. The neutral statute simply obligates out-of-state sellers to shoulder their fair share of the tax collection burden when using New Yorkers to earn profit from other New Yorkers. <br />
  29. 29. What Happened?<br />
  30. 30. New York Fever<br /><ul><li>Cal. AB 178 – Mirrors NY Bill
  31. 31. “I introduced Assembly Bill 178 for two reasons: to create a level playing field for our brick and mortar businesses and to collect sales tax that is rightfully owed, thereby helping our budget shortfall.”</li></li></ul><li>Who Opposes Cal AB 178<br />
  32. 32. Status<br />Passed orPassage Likely.<br />?<br />VETO!<br />VETO!<br />California<br />Hawaii<br />North Carolina<br />Rhode Island<br />
  33. 33. VETO<br />
  34. 34. What Next?<br />
  35. 35. Here Comes the Rain<br />
  36. 36. 2010:More States plusCongress<br />
  37. 37. Lessons Learned<br />
  38. 38. Key Factors Influencing Legislative Decisions<br />Policy<br /><ul><li>Policy Arguments/Solutions
  39. 39. Level of Congressional Understanding of Issues
  40. 40. Costs, Jobs & Competitiveness</li></ul>Players<br /><ul><li>Media
  41. 41. Grassroots
  42. 42. Committee and/or Subcommittee
  43. 43. Congressional Leadership)
  44. 44. Administration
  45. 45. Industry</li></li></ul><li>Key Variables<br /><ul><li>Political Strength & Level of Commitment of Sponsors
  46. 46. Nature & Strength of Opposition
  47. 47. Campaign Contributions
  48. 48. Timing
  49. 49. Coalition Lobbying</li></ul>Key Player Involvement – brings clout and media focus<br />
  50. 50. Ten Tips for Effective Lobbying<br />Be Informed About Them<br />Be Prepared<br />Be on Time<br />Be Brief and Focused<br />Be Factual<br />Ask Questions<br />Be Courteous<br />Be a Constituent<br />Request Something<br />Follow Up<br />10 TIPS<br />
  51. 51. Make It Relevant<br /><ul><li>Economic Benefits/Consequences
  52. 52. Jobs (within district)
  53. 53. Consumer Benefit/Loss
  54. 54. Survey Data
  55. 55. White Hats On Your Side</li></ul>Example: Reducing National Issue to State Impact<br />
  56. 56. Example – What is an Affiliate?<br />
  57. 57. Associations<br /><ul><li>Many assume monitoring role
  58. 58. Beyond that requires commitment
  59. 59. Washington Presence
  60. 60. Staffing
  61. 61. Key companies participating
  62. 62. PAC
  63. 63. Establishing & Maintaining Clout
  64. 64. Relationship Building
  65. 65. Grassroots Network
  66. 66. Lobbying
  67. 67. Media
  68. 68. Maintaining Presence</li></li></ul><li>Many Davids&gt; Goliath<br />Fortune Power 25 (2001)<br />1.  Nat&apos;l Rifle Ass&apos;n2.  AARP3.  Nat&apos;l Fed of Independent Business4.  American Israel For Affairs Comm. 5.  Ass&apos;n of Trial Lawyers of America6.  AFL-CIO9.  Nat&apos;l Ass&apos;n of Realtors<br />Also includes American Medical Ass’n, National Education Ass’n, American Farm Bureau, National Right to Life Committee, Nat’l Restaurant Ass’n.<br />
  69. 69. Always Remember Uncle Ted<br />
  70. 70. So Make it Simple<br />
  71. 71. Questions?<br />
  72. 72. Wright AndrewsButera & Andrews1301 Pennsylvania Ave., NW, Suite 500<br />Washington, DC 20004Phone:  202-347-6875 Fax:<br /><br />Bennet Kelley<br />Internet Law Center<br />100 Wilshire Blvd, Suite 950<br />Santa Monica, CA 90401<br /> Phone: 310-452-0401 Fax:<br /><br />
  73. 73. Butera & Andrews is a Washington, DC law firm specializing in federal government relations, litigation, and corporate law. Our practice involves high-level and on-going work before the Congress, the courts, and most federal agencies. We offer a blend of legal, political and other communication skills to help clients successfully manage their Washington legislative, regulatory and judicial issues.<br />In addition to the Congress, where we deal with all of the major Committees and the Republican and Democratic Leaderships, the firm’s representation on Washington regulatory and policy issues involves dealings with the White House and most of the major federal agencies, as well as Washington-based multinational institutions.<br />Our litigation practice spans federal and state trial and appellate courts and administrative agencies.  <br />
  74. 74. The Internet Law Center is dedicated to helping businesses navigate the evolving legal standards for today’s digital economy, while also contributing to the development of the policies of tomorrow.   The firm serves a diverse client base that includes startups and public companies both online and offline across North America and Asia.<br />The professionals of the Internet Law Center possess years of practical experience as lawyers and entrepreneurs with internet companies and have played a leading role in shaping Internet law and policy. This unprecedented combination of business, legal and policy experience makes the Internet Law Center uniquely qualified to provide the professional advice needed to address emerging issues of internet law in an uncertain economy. <br />Sign up for Monday Memo – our award winning newsletter which was named one of the Top 100 Internet Law Resources and re-launches this fall.<br />WE KNOW THE INTERNET<br />
  75. 75. THANK YOU!<br />
  76. 76. Remember to Submit<br /> Your Evaluations<br />