ADOTAS — No pitchforks mind you, but affiliate members are meeting with Californian lawmakers today to try and scuttle a change in the tax law that would force companies with no physical presence in the state to collect taxes.
Written similarly to New York’s “Amazon Tax,” AB 178 would include any retailer “entering into an agreement with a resident of this state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers of tangible personal property, whether by a link or an Internet Web site or otherwise, to the retailer.” Beth Kirch, a veteran affiliate leader who is helping to organize the statewide effort, said while a similar bill was killed last year, elected officials will vote against big business and could vote for new taxes, especially with California’s budget crisis.
“But they won’t vote against small businesses in their district,” she said, “The part that the affiliate marketing world plays, which is really important, is to put a real voice and face to this issue, so legislators understand that this bill has huge ramifications for local businesses in their district”
Assemblywoman Nancy Skinner’s office did not return phone calls, and Gov. Arnold Schwarzenegger’s staff said he doesn’t generally comment on pending bills.
Brook Schaaf, CEO of Schaaf Consulting said not only is the pending bill unconstitutional, but it is overly broad. “In California, the language is the definition of advertising,” he said. So basically the way it is written, it would include any advertising at all.” He also said Google affiliate programs could be affected as well as eBay.
Jonathan Johnson, president of Overstock.com, believes all of the similar legislation, whether in New York, California or in the nearly dozen other states considering it, will be overturned. Overstock,which sued New York, will be appealing a recent court ruling that the New York law was allowed. The company canceled its relationships with 3,400 affiliates there, but believes the higher courts will abide by a US Supreme Court decision and that it will reconnect with affiliates.
The US Supreme Court in 1992 said that retailers don’t have to collect sales tax unless they have a physical presence in the state where the customer resides. Otherwise, customers are required to declare the tax on their tax returns.
“We do not want to become a tax collector for legislatures,” he said. Johnson said no decision will be made about the affiliates in California, there are 229, until the bill has been signed.
Amazon stayed in New York. It’s unclear what it will do in California.
A committee hearing is scheduled for April 13.