What Happened?
On Friday, January 22, 2010, Bill HB10-1193 [pdf here], introducing the affiliate tax in the State of Colorado, has been released and referred to the Appropriations Committee. The Committee meeting is going to be held on January 27, 2010.
Here’s an excerpt from the bill:
(II) (A) Commencing March 1, 2010, if a retailer enters into an agreement with an affiliate under which the affiliate, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet web site or otherwise, to the retailer, then the affiliate shall be presumed to have solicited business on behalf of such retailer and such retailer is deemed to be doing business in this state. This presumption shall not apply unless the cumulative gross receipts from sales by the retailer to customers in the state who are referred to the retailer by all affiliates with this type of an agreement with the retailer are in excess of ten thousand dollars during the preceding calendar year. This presumption may be rebutted by proof that the affiliate with whom the retailer has an agreement did not engage in any solicitation in this state on behalf of the retailer that would satisfy the nexus requirement of the United States constitution during the calendar year in question. Nothing in this subparagraph (II) shall be construed to narrow the scope of any term for purposes of this article.
(B) For purposes of this subparagraph (II), “affiliate” means a person residing in this state that may solicit business by means of a public forum in this state.
So, plain and clear:
- It’s a bill that applies to all e-tailers who run affiliate programs, and does so as soon as the $10,000/yr in sales generated by CO affiliates to recipients in CO threshold is met
- “Affiliate” is defined exactly the way we define it, and the bill is targeting specifically affiliate marketing programs with affiliates in CO
- The law applies to all affiliates residing in the state of Colorado, whether or not the retailer is located in the state, and it is the retailer’s responsibility to collect/pay the tax due
- All customers (real and potential) count
- If everything goes according to the current plan of CO legislators, the law will come into power on March 1, 2010
It is unlikely that Governor Ritter will veto the bill, as he is rather supportive of the introduction of such a tax. Colorado faces $1.6 billion budget shortfall this year [more here], and the tax is believed to be one of the solutions.
What to Do?
Yesterday night I have received the following email from Stephanie Lichtenstein of the Fight Against the Advertising Tax Facebook group:
Time to get active, and let your voice be heard: both together with voices of other affiliates (as described above), and by contacting your legislators [find yours here] — and fast.
More on the Topic
In addition to the above, I strongly encourage you to study the following links on the subject to be fully informed on what’s going on, and what you can do:
- Colorado Hearing Date by Melanie Seery of Affiliate Advocacy
- Colorado Internet Tax thread on ABestWeb
- Colorado Proposes Advertising Tax by PMA
- Colorado Affiliate Tax Legislation Imminent by Scott Jangro
- Stop the Colorado Advertising Tax NOW! by Josh Todd
The CO bill did pass motion: 6 “yes” to 5 “no”, but there is still hope. Read more in Scott Jangro’s post Colorado Finance Committee Hearing on Affiliate Tax Outcome
On Wednesday evening and all day Thursday I began my own letter writing campaign. I wrote to the sponsors of the bill, and to each of the Democrats in the House of Representatives. By the time the bill came to the House floor on Friday, many of their mailboxes had filled up due to the amount of email they were receiving.
In addition now that HB10-1193 passed the first house vote on Friday evening, I understand from an email from Rebecca Madigan that they will have another vote on Monday, then it passes to the Colorado Senate. I believe this weekend is the time to write again to the House Democrats, and to the Senate Democrats. If you watched the proceedings on the Colorado Channel, you saw the Republicans stand up and defend our position. I applaud their efforts on our behalf. Unfortunately it did not sway the opinion.
Apparently the House Democrats are willing to gamble that the proposal will actually generate revenue for Colorado, which they believe to be about 4 million annually. We all know this is not going to happen after thousands of Colorado affiliates are fired by merchants they represent. Colorado will be lucky to get any revenue out of it at all.
The impact of the bill could be devastating for many businesses in Colorado, including mine. Employees working for larger affiliate based businesses could lose their jobs, or have to move out of state as the case may be. I am in favor of a physical protest if we can get enough Colorado affiliates to participate, and I am discussing this with others right now.
Education is the key. Lawmakers need to understand how our business works, and that this tax only targets affiliate marketers unfairly. It will also result in a decline in revenue to Colorado from the Income tax category. We need to get busy and keep writing and communicating about this unconstitutional bill.
Thank you for chiming in, Franklin. Excellent comment.
Yes, “this weekend is” indeed “the time to write again” to your representatives/legislators. The fight is not yet lost, and having listened to most of the hearing at the Colorado House yesterday evening, I was extremely pleased to see multiple representatives really standing against the tax that will “vaporize” (as one of the legislators pointed out) multitudes of small businesses, leaving thousands people without a job.
I agree that the idea of raising “$4 million annually” is a mere myth. Overstock has already announced that they will pull out of Colorado if the tax legislation passes. Amazon has pulled out of NC and RI after similar laws were passed in these states [glad to see yesterday’s article in The Colorado Statesman remembering this part], and as pointed out in CO House’s yesterday’s hearing, RI (which has implemented the tax) has not yet collected any money in this tax (but they did leave hundreds of businesses without a major source of income).
Yes, education is the key. Keep pressing on, Colorado affiliate marketers!!