Interview with Rexanne Mancini on California Affiliate Tax

We’ve been monitoring what’s been happening in California with affiliate nexus tax over the years, and now that the bill AB155 is signed, and many merchants are re-instating and/or re-inviting California affiliates back into their programs, I thought it’d be interesting to get an affiliate take on these things, and reached out to one of the first U.S. affiliate marketers I met in person (some 5-6 years ago) — a California-based writer and affiliate star Rexanne Mancini (more about her here).

Today I’d like to bring you my interview with her:

GP: Rexanne, thank you for agreeing to be interviewed on this important topic.

RM: My pleasure, Geno.

GP: To begin with, how would you summarize what has happened in California with (and around) the affiliate nexus tax law in the course of this year?

RM: CA legislators proposed that the “affiliate nexus bill” would result in an income generation for the state of more than 3 billion dollars, based on he assumption that if a merchant had CA-based affiliates, this represented a “physical presence” for these merchants (in effect, getting around the “taxation without representation” interstate commerce laws currently protecting merchants from the onerous burden of collecting state tax on sales made outside their own state’s borders).

Governor Gerry Brown (CA) was inundated with phone calls, emails and affiliates present in Sacramento trying to educate him on the futility of this law, which didn’t help. When he signed the proposed budget, more than 25 thousand California affiliates were dropped by Amazon.com and hundreds of other online merchants who simply had to drop CA affiliates in order to evade the new law and therefore pay no tax to the state of CA for online purchases anyway. For these merchants, it was business as usual because their affiliate programs were still in tact, still selling to residents in CA but California-based affiliates were denied the ability to sell through their programs. All it did was disrupt the businesses of California-based affiliates and created lost revenue for the constituents of the state.

GP: As a California-based affiliate, I’m sure, you were terminated from multiple affiliate programs as soon as (on July 29) Governor Brown signed the bill into law. Two questions in this regard: first of all, approximately what percentage of merchants you worked with terminated you from their programs because of the law, and, secondly, was it the termination from Amazon’s affiliate program, or something else, that was the worst hit for you?

RM: I’m not sure of percentages, however, I was dropped from about 150 affiliate programs overnight and hundreds more over the following weeks, creating havoc on my web sites and greatly diminishing the user experience for visitors to my pages.

The termination of my Amazon.com affiliate account had the hardest hitting effect. I had several thousand Amazon.com links on my site, across hundreds of pages.  Amazon.com continued to makes sales from the links on my site because the links still landed on the Amazon.com targeted pages. I just wasn’t making any commission on these sales. The other merchant programs that dropped me were through affiliate networks and most of those links were immediately invalid when clicked from my sites. I’m not sure which was worse. lol – That Amazon had no disruption of sales through my efforts on their behalf while I was denied commissions on sales irks me. Granted, my visitor experience was not affected which is a small consolation.

GP: We know that Amazon has recently invited CA affiliates to re-instate themselves in their affiliate program. Have you seen any other major affiliate programs doing the same?

RM: Yes, many other merchants have re-instated California affiliates because of this reprieve.  Ironically, it took Amazon.com the longest time to reinstate CA affiliates, with most merchants reinstating CA affiliates immediately. Amazon.com (conveniently?) waited until the beginning of Q4 to reinstate.

GP: On Sept 8 Amazon.com cut a deal with CA legislators (and on Sept 23 Gov. Brown signed it into a law) which postpones the collection of the tax for one year. What would be your forecast/expectations on where it’s gonna go?

RM: I’m not confident of my opinions about what will happen a year down the line to talk about it with any authority. I believe Amazon.com struck a deal with the state of California to  build warehouses in the state, thus creating a physical presence in CA anyway which will result in Amazon.com having to pay CA sales tax if a federal Internet tax law is not enacted by the end of the year. I’m not sure I understand all the particulars or how this will help Amazon.com in its attempt to avoid paying Ca sales tax. I believe the idea is to wait for a federal Internet tax law to be imposed which will negate the state laws that have been passed. If there is no federal law enacted within a year, my understanding is that online merchants will again be liable for CA sales tax. It all sounds like a crap shoot to me, evidently based on if a federal law is passed within a year.  Again, the Ca-based affiliates are the pawns in the chess game. i.e.: disposable. It could happen and California affiliates need to be on top of any legislature moving forward and be ready for any eventual fallout.

GP: Is there anything that hasn’t been brought up in blogs, speeches and articles that you’d like to draw affiliate community’s attention to (in regards to anything related to the situation in California)?

RM: There are so many issues that this legislature has brought to light for small business owners and affiliates, across all the states that have passed these misguided laws. Most importantly for affiliates of any state, the need for diversification across multiple merchant programs to withstand these attacks on our livelihoods.

Another issue that I think needs to be looked at closely is the viability of affiliate marketing as a business model. It concerns me that individual affiliates have no real power in this industry, or any real value when state legislation can wreak havoc on our livelihoods overnight. The foundation of this business is on unstable ground and I think we need to build a reinforced structure going forward to protect the affiliate business model.

GP: You’ve touched upon the stings that will, undoubtedly, resonate in the hearts of many of my readers, Rexanne. Once again, thank you for your time.