California Anti-Nexus Lobby Day 3

A huge thank you to everyone who made it up to Sacramento for today’s lobbying efforts!

At the end of April we thought that we had killed California’s affiliate tax bill when AB 178 was moved to a two year bill. Unfortunately,  “nothing ever dies in Sacramento,” as they say. Last week the nexus language returned through the state budget committee, which included it in a grab bag of “acceleration provisions.” The new language, inspired by AB 178, reads:

Extends sales tax “nexus.” Requires out-of-state sellers, such as Amazon, that pay commissions to California firms or residents for sales referrals (often through a website link) to collect sales tax on their sales to California residents. This provision improves compliance, but does not change tax liability. Existing law requires Californians to pay equivalent use tax on these purchases, but compliance is low. Provisions reflect AB 178 (Skinner). The estimated General Fund revenue gain is $48 million in 2009-10 and $110 million annually, with additional revenue increases in local sales tax revenues.

This is being voted on this week but most people seemed to feel more negotiation will push things out at least until next week. Our goal today was to press our point on the negative economic consequences this legislation would have. We split into three groups and met with about 45 legislative staffers. We advanced the same main argument as before: this legislation will harm small businesses in California by discriminating against a specific type of advertising. New since last time were:

  • The documented 50% drop in New York publisher revenue, attributed to New York’s nexus law.
  • Amazon’s pledge to sever relationships with California affiliates if the legislation passes.

The short of the long is that no one is sure where this is going to end up. I think our argument on the damage to small businesses has started to penetrate and I personally felt better about this trip than the last time I was up. Governor Schwarzenegger has pledged to veto any tax increases. This may or may not count as a tax increase (as opposed to a collection effort) but we definitely have some allies who want to strike this language. Moreover, there are two other proposals, 711 and 469, that would bring in sales tax revenue without harming affiliates.

Earlier today Google Affiliate Network, Commission Junction, and LinkShare all dropped emails to their California affiliates. These efforts, along with all the Tweets, posts, and smaller email blasts, are VERY helpful to our cause. We definitely heard that we were making our presence known. If you are a California affiliate and you have not yet written your representative regarding this issue, please do so ASAP. We are having an impact and we have a realistic chance to derail this destructive measure. Huge props to everyone doing their part.

UPDATE 6/24/09:

Not sure where this will lead: <a href=””>Democratic plan to fix budget headed for defeat</a>

About Brook Schaaf

You can find Brook on Twitter @brookschaaf.

5 Responses to California Anti-Nexus Lobby Day 3

  1. Affiliate Tax Ruins says:

    "If you are a California affiliate and you have not yet written your representative regarding this issue, please do so ASAP"

    Please provide contact info and a prewritten sample letter.

  2. Brook Schaaf says:

    Here is a sample:

    Subject: OPPOSITION to Sales/Use Tax Nexus Bill (AB 178 Skinner)

    Dear Senator [Insert Last Name]

    I am a small business owner with a website, and I am in strong opposition to Sales/Use Tax Nexus Bill (AB 178 Skinner), which would require retailers that receive referrals from advertising on websites, such as mine, to collect sales tax in California.

    I am opposed to this bill because it would substantially harm my small business by reducing a large source of revenue that I depend on to survive. This revenue results from providing advertising on my website on behalf of out-of-state retailers. [Describe briefly how your business model is set-up and what you contribute to the local economy.]

    If retailers believe that doing business with me will result in their having to collect sales tax on all California sales, they likely will sever ties with my business, putting the viability of my business at risk. Such was the case in New York State where Overstock dismantled its affiliates program and hundreds of other business followed Overstock's example. This left thousands of small- and medium-sized affiliate businesses with a 50% loss of income.

    Unfortunately, this bill is futile. If enacted, retailers will drop me as a partner, California won't collect sales tax as a result – and my business will be devastated in the process.

    For these reasons, I respectfully oppose this legislation.


    [Your Name]

  3. Brook Schaaf says:

    You can look up your legislators here:

  4. Jeremiah says:

    This is the biggest bunch of bull ever. What a sock in the stomach to the little guy. I'm going to have to move out of California.

  5. Phil says:

    This is rediculiuos …my employer is making me move to Nevada or lose my job….I have 2 kids and a life her in California for the past 15 years…