Killing the Affiliate Nexus Tax Dead!
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How the “affiliate nexus tax” was killed once and for all – and launched performance advertising onto the national e-commerce stage. Experience level: Beginner, Intermediate, Advanced Target audience: Affiliates/Publishers Niche/vertical: Nexus Scott Allan, Vice President of Marketing, LinkShare (Moderator) David Andre, Founder & Chairman, Cartera Commerce, Inc. Rebecca Madigan, Executive Director, Performance Marketing Association (Twitter @pmassociation) Matthew P. Schaefer, Partner, Brann & Isaacson
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Killing the Affiliate Nexus Tax Dead!
- 1. Killing the Affiliate Nexus Tax Dead Affiliate Summit East August 2011
- 2. Moderator Scott AllanVice President of Marketing, LinkShare Panelists David L. AndreFounder and Chairman, Cartera Commerce Rebecca MadiganExecutive Director, Performance Marketing Association Matthew Schaefer, Esq.Partner, Brann & Isaacson Introductions
- 3. Click-Through Tax Affiliate Nexus Tax Internet Tax Advertising Tax Amazon Tax E-Fairness Act Main Street Fairness Tax Streamlined Sales Tax
- 4. Interstate Commerce Physical Presence = Nexus No Physical Presence = Not Required to Collect Sales Tax What Constitutes Physical Presence?
- 5. States that have adopted Affiliate nexus laws: New York North Carolina Rhode Island Arkansas Connecticut Illinois Vermont* California In addition, similar bills have been introduced in other state legislatures Several States Pass “Amazon Laws”
- 6. Grassroots SuccessFailed in 32 States, Passed in 8 No Law Passed
- 7. Mass Retailers Association launched major PR and legislative campaign in Q1. Immediately sought advice from colleagues at PMA and super-affiliates in Illinois. The three largest affiliates in MA organized, engaged a top lobbyist and PR firm. After a major effort we were able to bottle the bills in the Finance Committee, and avoid an end-run where the language was slipped into the budget process. Second-level defense: A major education effort to key legislators, leadership, governor’s office and administration. Massachusetts Case Study
- 8. Get the best advice possible.Research what lobbyists have clout. Organize and fund a coalition.Budget for a long-term effort.Assign a credible spokesperson. Fight the legislative front to win.Fight the PR front for parity. Engage the opposition. Focus on simple messages.This bill won’t work. Job loss. Revenue loss. Engage associations. (i.e. New England VC Association) Engage broad network of affiliates and employees, yet use them judiciously. Massachusetts Learnings
- 9. The PMA has filed suit in Chicago challenging the Illinois affiliate nexus law, HB 3659 The PMA alleges the law unlawfully targets online performance marketing It violates the Commerce Clause of the United States Constitution And the federal Internet Tax Freedom Act PMA Challenges Illinois
- 10. HB 3659 uses the relationship between Illinois publishers and out-of-state advertisers to impose a use tax collection obligation on Internet retailers located outside the state Under HB 3659, the display of online advertisements on the websites of Illinois affiliates where compensation is based on sales can create nexus for an out-of-state retailer Retailers using other forms of national advertising are not, however, required to collect Illinois use tax HB 3659: Affiliates are the Nexus “Hook” For Internet Retailers
- 11. New York Litigation Amazon and Overstock challenged the New York web affiliate law State intermediate appellate court concluded that the New York statute did not violate the Constitution on its face Court rulings inconclusive - further judicial proceedings are underway
- 15. A big issue for small-medium internet retailers! Spend time on this - make sure the executives at your company understand the importance of the issue Organized campaigns are successful Disorganized campaigns are easy targets for the opposition! Not Just an Amazon Issue
- 16. Stay informed Attend grassroots events! Sign petitions Call and write to your legislators Get Involved! www.performancemarketingassociation.com
- 17. Q&A
- 18. Thank You! Rebecca Madigan Executive Director Performance Marketing Association www.performancemarketingassociation.com rebecca@performancemarketingassociation.com Dave Andre Founder and Chairman Cartera Commerce, Inc. www.cartera.com dandre@cartera.com Matthew Schaefer, Esq.Partner Brann & Isaacson www.brannlaw.com mschaefer@brannlaw.com
Editor's Notes
- Scott does the introductions and introduces themePMA is doing things differently, being much more aggressive, we’re going to kill this thing once and for all
- Affiliate Nexus Tax defined – “Use Tax”; Interstate Commerce; Determining what creates Nexus or “presence” in a state (e.g. warehouse, advertising etc)Matt to support
- In all, 32 states have previously killed the affiliate nexus tax. It has passed in 7:New York (2008) North Carolina (2009) Rhode Island (2009) Illinois (2011) Arkansas (2011) Connecticut (2011) California (2011) Vermont* (2011): will go into effect after 15 states adopt it63,000 affiliates have had their incomes devastated since these laws have passed It didn’t pass anywhere in 2010 when our grassroots efforts were 100% effective. What changed in 2011 was that big box retailers pushing for these bills and funding their candidates into office. Not sure you want to talk about the PMA’s approach of keeping everything stealthy. We do that because watching us closely. We can’t disclose any of our tactics or they’ll use them against us – it happened a lot in 2009 when we were still figuring out what we were doing. But if we don’t have affiliates involved, we lose. Affiliates are the faces behind the collateral damage, it makes these bills personal and that is tremendously effective in convincing legislators. I’d move on to your MA experience. I’d touch on how you built a local coalition, hired a lobbyist, had a big turnout at a hearing, had a lot of testimony, followed up frequently with legislators, got to be known on the Hill, and how you support Streamline/federal solution.