Affiliate Tax in Cali

[Sohan]

Just looked at the picture on http://blog.affiliatetip.com/archives/linkshare-maps-out-california-affiliates/ and that's fucked up. If your one of those red blips I hope your writing to your law makers too. If Cali passes this, then it will snowball to other states.

 

[coolguy20]

Actually other states including NC are moving towards this too. Its hard to understand what & how they're going to tax affiliates though, but I got the impression that in NC it could be as much as 4.05% of all revenue.

 

[aim high]

what exactly is the tax going to do?

 

[Jsmith]

what exactly is the tax going to do?

Pay for more irresponsible spending?

 

[unfadable858]

pay for warfare

 

[Shawn Collins]

Actually other states including NC are moving towards this too. Its hard to understand what & how they're going to tax affiliates though, but I got the impression that in NC it could be as much as 4.05% of all revenue.

It's not a matter of taxing affiliates in this case, but rather the states saying an affiliate program with an affiliate in the state constitutes a nexus, so the state can charge the customer sales tax, even when the merchant doesn't have a physical presence in the state.

So, many merchants are kicking out affiliates in states that pass this sort of law.

It happened last year in NY and now CA, MN, CT, HI, and other states are working on similar legislation.

 

[richd63]

pay for warfare

Yes Yes! More warfare as if that's what we really need at this time!

 

[zeroglory]

This sounds horrible.

 

[mediasup]

More reason why you should setup your business overseas or at least in states like Nevada

 

[wheinrome]

Establishing a business entity in another state will not eliminate from the bills crosshairs. If you physically reside in the state of California you create a nexus. Some NY affiliates have moved to NJ to avoid this nonsense.

 

[Travis_Ecomlead]

I thought at the moment that Cali was already taxing online earnings, but you had to report it on your taxes yourself. Does this mean they are going to make it automated now?

 

[Derek Pankaew]

More reason why you should setup your business overseas or at least in states like Nevada

No, the bill is phrased in such a way that what matters isn't where your business is setup, but where you reside.

I thought at the moment that Cali was already taxing online earnings, but you had to report it on your taxes yourself. Does this mean they are going to make it automated now?

No, the new law doesn't tax you, it forces your customers to pay tax.

Say you're selling an Acai berry product. If you, as the affiliate, live in California and you cause the sale to happen, the person on the other end would have to pay a California tax because you're "part of the sale."

That's why affiliate networks are kicking affiliates from NY off. They wouldn't give a shit if affiliates had to pay more taxes, but if they have to build a whole new backend to charge their customers more taxes and reduce conversions, that's a different story.

 

[Sohan]

I just hope the residents and affiliates of Cali stand up to this nonsense. If they don't soon all the states will have this BS.

 

[Nikko]

If they don't soon all the states will have this BS.

Then nobody will do affiliate marketing, and none of the states will get any tax revenue. The perfect bureaucratic solution!

Seems to me like the workaround should be obvious - create a coporate entity that resides in another state, and have the corporation be the affiliate. That way you yourself can reside anywhere you want.

 

[Derek Pankaew]

Then nobody will do affiliate marketing, and none of the states will get any tax revenue. The perfect bureaucratic solution!

Seems to me like the workaround should be obvious - create a coporate entity that resides in another state, and have the corporation be the affiliate. That way you yourself can reside anywhere you want.

The law isn't based on where your corporation is formed. It's based on where you reside.

It's technically phrasing is something like "If the person who caused the sale to happen resides in the state of California, the customer of this person must pay an affiliate tax."

If it were that easy, it'd be no big deal at all.

 

[Sohan]

Some one who lives in Cali and other states mentioned should get the details of local reps to contact with email and phone number. Then WF users should draft something up and send it them en mass and get noticed - or this won't go away.

 

[Jsmith]

Some one who lives in Cali and other states mentioned should get the details of local reps to contact with email and phone number. Then WF users should draft something up and send it them en mass and get noticed - or this won't go away.

Here's a link to the directory of all the assembly members in California.
ACS Frameset7


I've already contacted the assembly members in my district and am continuing to contact the one's that are not.


Here's a copy of an email I sent to the members in my district. It uses part of the linkshare letter and I added a few things. I'm drafting a formal letter and mailing them out on Friday. Hopefully, this doesn't pass because other state's will try and adopt the same thing.

I implore you to oppose AB 178. As a California internet affiliate marketer the passing of AB 178 will severely inhibit my ability to earn a living. AB 178 is of great concern to me and my contemporaries in the online advertising industry because when a similar bill was passed in New York State, hundreds of online merchants terminated their relationships with thousands of affiliates in order to avoid collecting New York State sales tax. This directly resulted in a significant decrease in revenue for small affiliate marketing and advertising businesses in New York. This will also happen in California. The passage of AB 178 will also directly effect web designers and coders that are employed by myself and people in the industry. Unfortunately, if AB 178 passes I will be forced to relocate myself and my business to Nevada. I love California and continue to live and do business here despite paying an exorbitant amount in taxes. My heart and life our with California but if AB 178 passes I will be forced to close up shop or move to a neighboring state without the tax. I fully understand our state is in a fiscal crisis and with balancing the budget some people are going to get hurt. However, I am not sure that the assembly fully understands the consequences of the passage of AB 178 and the resulting loss in tax revenue; both personal and business. Please take my words seriously and fight for the opposition of AB 178.

 

[johu]

The problem with this bill is that it's a bit broad - From what I've seen, the terminology is pretty weak. There's actually a very good analysis posted by a member of ABW at How Do We Want to Change California's "Amazon Tax" Bill? - ABestWeb Affiliate Marketing Forum - Since CJ and Google Affiliate Network are owned by companies in California, this could technically force all merchants with affiliate programs in those networks to charge CA sales tax. I'm not sure if the NY law made all Linkshare merchants do the same, but I don't believe it did. Mark @ ABW also points out how the current wording can apply to ANY advertising in California, potentially including AdWords or offline advertising. The specific wording from the bill is

(5) 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, if the cumulative gross receipts or
sales price from sales by the retailer to customers in this state who
are referred pursuant to these agreements is in excess of ten
thousand dollars ($10,000) during the preceding four calendar
quarterly periods. This paragraph shall not apply if the retailer can
demonstrate that the resident with whom the retailer has an
agreement did not engage in referrals in the state on behalf of the
retailer that would satisfy the requirements of the commerce clause
of the United States Constitution during the four quarterly periods
in question.

 

[BlueYonder]

Tax attorneys probably could finagle an arrangement giving an affiliate a legal proxy residency in a tax-free state. Rich people employ professionals to find these loopholes.

 

[cliqz]

The law isn't based on where your corporation is formed. It's based on where you reside.

It's technically phrasing is something like "If the person who caused the sale to happen resides in the state of California, the customer of this person must pay an affiliate tax."

If it were that easy, it'd be no big deal at all.

Seems like room for a loophole still there Derek.

Because a business IS an entity. And if the business caused the sale and it's in Nevada, where the business owner happens to have a summer home is irrelevant. The person didn't cause the sale. The business did.

If the business has 4 partners spread across multiple states, what are they gonna do? The "where they reside" BS is nonsense and won't hold up in court if it's fought.