This just in from the Honolulu Advertiser:

Posted on: Thursday, July 2, 2009

Veto of Hawaii excise tax on online retailers likely to stand

No override planned to impose Hawaii levy on Mainland retailers

By Derrick DePledge
Advertiser Government Writer

Gov. Linda Lingle’s veto yesterday of a bill that would apply the state’s general excise tax to Mainland retailers with Internet links to Hawai’i will likely stand, after state lawmakers said they will not attempt an override because of a technical flaw.

Amazon and Overstock.com had threatened to cancel affiliate marketing arrangements with local Web sites if the bill became law, and both have since canceled Hawai’i affiliations. The Seattle- and Utah-based companies contend that the bill was unconstitutional because neither has a physical presence in the Islands and should not be subject to the state tax.

Both companies, however, had said they would restore marketing relationships with local Web sites if the bill was vetoed and not overridden. Local Web sites can get paid to lure customers to Mainland-based retailers through links.

Local Internet businesses and bloggers had predicted other companies would follow Amazon.com and Overstock.com and drop affiliates in Hawai’i.

“I am vetoing this bill immediately to help ensure Hawai’i is not economically hurt by legislation that was not well thought out and would have negative consequences for nonprofits such as the University of Hawai’i bookstore, and businesses throughout our state,” Lingle said in a statement. “I am hopeful by vetoing this bill that Mainland-based companies will promptly restore their relationships with our state.”

Lingle also said the state attorney general found that the bill may be legally defective because its scope was broader than the subject of its title.

2nd tax proposal

State House Majority Leader Blake Oshiro, D-33rd (’Aiea, Halawa Valley, ‘Aiea Heights), said House lawmakers will not try to override the veto because of the technical flaw. Overrides require a two-thirds majority of votes in both the House and Senate to succeed.

Oshiro also said it is questionable whether the House would override a potential veto of a separate Internet tax proposal. That bill would allow Hawai’i to join nearly two dozen other states in the Streamlined Sales Tax Project to simplify state tax laws and help persuade retailers to collect and pay state taxes. The compact is voluntary. States are not able to require retailers to collect state taxes until Congress passes federal legislation signaling that the project does not interfere with interstate commerce.

Consumers in Hawai’i are supposed to pay a use tax on mail-order and Internet purchases, but the state does not enforce the law except on some big-ticket purchases such as automobiles. Hawai’i is losing as much as $37 million a year in uncollected taxes on Internet commerce.

The two Internet tax approaches had been paired together as they moved through the Legislature last session, so the death of one could mean trouble for the other.

State Sen. Carol Fukunaga, D-11th (Makiki, Pawa’a), noted that Amazon.com and other retailers prefer the Streamlined Sales Tax Project because it would bring some uniformity to conflicting state tax laws. She believes it would also help level the playing field for brick-and-mortar businesses that have to pay state taxes.

“I think it’s the appropriate path to take for a state,” Fukunaga said. “It’s not intended to create any kinds of new pressures, it’s simply to collect taxes that are currently on the books.”

State Rep. Isaac Choy, D-24th (Manoa), said Amazon.com and Overstock.com are basically arguing that they want to do business in Hawai’i but do not want to pay state taxes. “The mail-order business and Internet sales business are growing by leaps and bounds, and we’re going to have to tax that tax base sometime in the future, and do it properly,” he said. “One, it’s a huge tax base. And two, it’s a fairness issue for the brick-and-mortars.”

Amazon.com freeze

Amazon.com, the nation’s largest online retailer, dropped affiliates in Hawai’i, North Carolina and Rhode Island because of the tax issue. The states had modeled the tax proposals after a law passed in New York last year that Amazon.com is challenging in court.

Overstock.com dropped affiliates in Hawai’i, North Carolina, Rhode Island and California. “It’s awful to have to terminate these relationships with affiliates, simply because they live in states where unconstitutional laws are being passed,” Patrick Byrne, Overstock.com’s chairman and chief executive officer, said in a statement. “However, politicians have to remember that a tax is a price that government charges for a service, and when they raise their prices, we’re going to buy less of their services.”

Local Internet advocates warned that the bill could chill financial opportunities for local Web sites, from small one-person blog sites to larger operations such as the Advertiser and the Star-Bulletin.

“I’m hoping that Amazon.com and Overstock.com will reinstate Hawai’i affiliates,” said Troy Fujimoto, new media director for the Star-Bulletin.

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com.

Dear North Carolina Affiliates:

Your state legislature isn’t entirely convinced that a state/use tax nexus law is a bad idea. Since they have just postponed their budget vote for a couple of weeks, we need to make sure they hear how devastating this kind of law would be on affiliate marketing. We know your letters, calls and visits are working! We also know the story of how you will be personally impacted is the most effective. We need your help with another campaign. Please provide us a one-page description of your business and how this law would impact you.  We  will print out and hand deliver these pages to key leaders and the governor.  Consistently, the primary message that resonates with lawmakers is the devastating impact on North Carolina businesses.

By Tuesday, July 7th:

• Create a one-pager about your business. It should be brief, describe your business and how you earn money from affiliate marketing, earnings and state sales taxes you paid, if you are willing to share, # of employees, and screen shots/links on your pages. Please be polite; our politicians are under a tremendous amount of pressure. A suggested template is below.
• Email it to: Rebecca@performancemarketingalliance.com

Many thanks,

Rebecca Madigan

Founder | Performance Marketing Alliance, Inc.

www.performancemarketingalliance.com

Template:

The Honorable Governor Bev Perdue
Office of the Governor
20301 Mail Service Center
Raleigh, NC 27699-0301

Subject:  I Oppose the Sales/Use Tax Nexus bill
Dear Governor Perdue:

My business will be devastated by the sales/use tax nexus bill. I am being discriminated against because I make my living by selling advertising on my website.

[Insert description of your business and how you earn a living from affiliate marketing. Include earnings state income taxes you paid last year, if you so choose, number of employees if applicable. And include links and screen shots. Keep it short!!! ]

This law would be futile: my partners will sever their advertising relationships with me; my income will be devastated and North Carolina will not collect sales tax anyway. I respectfully ask you to remove the sales/use tax nexus clause from the budget bill.

Sincerely,

[Include name, business name and address]

In what is turning out to be the whackiest day in legislative history, Hawaiian governor Linda Lingle puts out a press release  and position about her veto of the nexus tax bill. We had a mighty team of affiliates who rallied hard in Hawaii, and it worked! Okay, well, technically, it is still in the hands of the legislators, but they would be fools to override her veto! ALOHA!!!!

GOVERNOR LINGLE VETOES ONLINE TAX BILL

HONOLULU - Governor Linda Lingle vetoed HB 1405 today because this legislation has immediate and adverse consequences for residents and businesses of Hawai’i.  This legislation would place Hawai’i companies at a competitive disadvantage.  As a consequence of this bill, Hawai’i businesses would no longer be able to receive commissions for advertisements on their website that link to numerous national and international firms that offer goods and services to Hawai’i residents.

Already Amazon.com and Overstock.com have officially sent out notification that they are severing their “affiliate” relationships with Hawai’i.  Other well known internet-based firms, such as eBay are likely to do the same if prompt action is not taken.  Hawai’i residents can still order directly through these online retailers’ websites.

“I am vetoing this bill immediately to help ensure Hawai’i is not economically hurt by legislation that was not well thought-out and would have negative consequences for non-profits such as the University of Hawai’i bookstore, and businesses throughout our State,” Governor Lingle said.  ”I am hopeful by vetoing this bill that mainland-based companies will promptly restore their relationships with our State.”

The Attorney General found that HB 1405 HD2 SD2 CD1 may be legally defective in that it may violate Article III, Section 14 of the Hawai’i State Constitution.  This Article provides that each law shall embrace only one subject which shall be expressed in its title.  The scope of HB 1405 may be broader than its title indicates and thus the legislation may not meet the constitutional test.

“We are hopeful the Legislature will recognize this legal flaw and not act to overturn my decision to veto this measure,” Governor Lingle added.

The Legislature can convene on July 15, 2009 to determine if they will sustain or override the Governor’s actions on any measures she vetoes between July 1, 2009 and July 15, 2009.  On June 30, 2009 the Governor issued a list of 65 bills passed during the 2009 Legislative session that she is reviewing for potential veto action.  This is one of those bills.

The Governor’s statement of objections regarding HB 1405 is attached and can also be found on the Governor’s website at:  www.hawaii.gov/gov/initiatives/veto <http://www.hawaii.gov/gov/initiatives/veto> .

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The following charter members are people and companies dedicated to the formation of the PMA. They are providing our foundational leadership.

Affiliate Summit

Shawn Collins, co-founder

Amazon.com

Paul Misener, vice president of global public policy

Commission Junction

Kerri Pollard, general manager

EBay, Inc.

Will Martin-Gill, director, internet marketing

Epic Advertising

Michael Sprouse, chief marketing officer

FatWallet

Tim Storm, chief executive officer

FABU Marketing

Michael Yack, president

Google Affiliate Network

Chris Henger, group product manager

Linkshare Corporation

Adam Weiss, vice president , network development

Lurn, Inc.

Anik Singal, chief executive officer

MediaTrust

Peter Bordes, chief executive officer

Pepperjam

Kristopher B. Jones, president and chief executive officer

RingRevenue, Inc.

Jason Spievak, chief executive officer

Vertive, Inc.

Steve Schaffer, founder and chief executive officer

Where 2 Get It, Inc.

Manish Patel, chief executive officer

Alan Chapell, Chapell & Associates

Anthony Bajoras

Beth Kirsch

Bob Drumm, AC Lens

Brad Waller, EPage, Inc.

Brendan Smith, Motive Interactive

Brook Schaaf, Schaaf Consulting

Connie Berg, FlamingoWorld.com LLC

Damian Juarez-Mrazek, Schaaf Consulting

Durk Price, e Accountable OPM, LLC

Evan Weber, Experience Advertising

Forrest Schaaf, Schaaf Consulting

Hamlet Batista

Josh Ingliss, Home Depot

Karen Garcia, GTO Management

Kellie Stevens, Affiliate Fair Play

Kelly Powers, 4 Paws Marketing, LLC

Kimberlee White, AKMG, Inc.

Kurt Lohse, Keycode.com

Linda Woods, PartnerCentric

Loren Bendele, Savings.com

Mahfiruze Okten Gokce, Affmeter

Marc Mazzone, Upromise

Mark Kirschner, Linkshare

Mike Allen, Shopping Bargains

Nate Meyer, ForMeToCoupon

Peter Figueredo, NETexponent

Rebecca Madigan, Mad Again Media

Ronald Wagner, E-FORMZ

Sarah de Diego, Pulse Marketing, Inc.

Scott Jangro, MechMedia

Stephanie Harris, Schaaf Consulting

Todd Crawford

Troy O’Bryan, Response Capture

This press release just hit !  Affiliates told their stories and the governor got it. Well done everyone!

Governor Schwarzenegger Remains Committed to No New Taxes, Announces Overstock.com Will Continue to do Business in California

Following Overstock.com’s announcement that it will pull its affiliate advertising from California due to the legislature’s proposal to increase taxes and the announcements of other companies such as Amazon.com threatening to follow suit, Governor Schwarzenegger today reiterated his deep commitment to not raising taxes to solve our state’s budget deficit and announced Overstock.com will reinstate California-based internet affiliate advertisers:

“After passing the largest tax increase in California history, it makes absolutely no sense to go back to the taxpayers to solve the current shortfall - that’s why yesterday I vetoed the majority vote tax increase passed by the legislature. With unemployment at an all time high, we should be doing everything we can to - keep jobs and create jobs - in California. That is why my Administration immediately contacted Overstock.com when we learned of this news and, I am pleased to announce Overstock.com has reversed its decision and will continue to do business with affiliates here in California. I will continue to fight to keep jobs and businesses in California.”

California lawmakers proposed a tax on affiliate advertising and sent legislation to the Governor, but as promised he vetoed it because we cannot solve our budget deficit by raising taxes and driving businesses out of the state.

Overstock.com estimates its internet affiliate advertisers in California create millions of dollars in revenue.

###

This morning brings news that Overstock dropped its affiliates in California, North Carolina and Rhode Island. Rhode Island passed a nexus law, which went into effect immediately. California and North Carolina have not yet passed theirs, and there is significant optimism that they won’t. But Overstock is being cautious.

If North Carolina passes, it would go into effect immediately. They are expected to vote by July 15th. I’m guessing that is why Overstock made the move now. If California passes, it would go into effect 90 days from passage. No one has any idea when the California budget will pass.

Interesting to note: Amazon has NOT terminated its affiliates in California. Are they optimistic? I hope so! They did, however, preemptively terminate North Carolina, Rhode Island and Hawaii affiliates.

Speaking of Hawaii: We learned last night that Governor Lingle is vetoing several bills in the budget, the nexus tax included. We had a pretty effective grass roots campaign targeting her, and it looks like she paid attention. However, the legislature is mostly Democrat, so they could overturn her vetoes. So it isn’t entirely over there! Keep up your letter writing!

Speaking of Rhode Island: Yesterday, on Fox News’ ‘Bulls & Bears’ show, Rhode Island Treasurer Frank Caprio was interviewed on his take on Amazon’s stance to terminate affiliates. Mr. Caprio said he is totally against the law, he thinks it was a bad idea. He understands it will devastate affiliates, and the state won’t get anything positive out of it. And he’s a democrat! It was a fantastic segment, the commentators really articulated the impact on affiliates. If anyone can find a video of it, pass it my way!

We also heard the following merchants are dropping affiliates in North Carolina and Rhode Island: Musicians Friends, Cabela, Blue Nile and Textbooks.com.

– Rebecca Madigan

The Rhode Island legislature approved the state’s budget bill by an overwhelming, veto-proof majority, and it included the state/use tax nexus law. This will likely have a devastating effect on affiliate marketers in the state. Amazon announced last night that it has terminated its associates in that state, and we can expect other merchants to follow suit. When a similar law was passed last year in New York, over 200 merchants terminated their programs. We have yet to hear any direct information from other merchants.

We defeated similar laws in Connecticut, Maryland, Minnesota, Tennessee and Wisconsin; only New York and Rhode Island have actually passed them. Hawaii is predicted to pass its law, and North Carolina and California are still waging.

Background information on this issue can be found here.

The Wall Street Journal just published this:

Amazon Drops More Affiliates to Avoid Tax

By GEOFFREY A. FOWLER

Amazon.com Inc. ended its business relationships with marketing affiliates in Rhode Island so the online retailer could avoid collecting sales tax in the state.

Rhode Island’s state legislature recently passed a bill that would force companies to collect sales taxes if they have online-marketing affiliates—businesses that get a sales commission by featuring links to outside e-commerce sites on their own Web sites—in the state.

The Rhode Island termination follows a similar move by Amazon last Friday to end its relationships with affiliates in North Carolina as the state approached passing a similar law. Cash-strapped states across the country have looked at similar legislation to boost revenue. Such a law went into effect in New York last year.

Amazon, based in Seattle, sent an email to its Rhode Island affiliates on Monday saying that it was closing their accounts immediately. “This is a direct result of the unconstitutional tax collection scheme passed by the Rhode Island General Assembly with a veto-proof majority,” said the message.

Amazon spokeswoman Patty Smith said the company took the action now because the Rhode Island bill had passed with veto-proof majorities. “The bill would take effect immediately upon enactment—either the governor’s signature or an override of his veto,” she said.

Amy Kempe, press secretary for Rhode Island Gov. Donald Carcieri said that the governor was still deciding whether or not to sign the budget bill passed by the legislature, and would do so by Wednesday. The state faces a $590 million deficit for the fiscal year starting in July.

Rebecca Madigan, founder of the affiliate trade group Performance Marketing Alliance, estimates there are some 2,000 online affiliates in Rhode Island, who pay about $3 million in state income tax. “We’re seeing small businesses being hit. They are the collateral damage through all of this legislation, which inaccurately classifies affiliate marketers as sales agents” rather than advertising channels, she said.

Someone named CHarris added this comment to another post - and it is very post-worthy. If you live in NC, the following people are decision makers. It is time to let them know how you feel. Take a few minutes to send each of them an email, or visit their own websites and submit comments. There’s a suggested template below.

Thanks CHarris!

charris.blog@gmail.com

In NC Representative Thom Tillis is fighting the affiliate tax. He sent a broadcast message to 2,000 citizens about the issue: http://tiny.cc/armZn

So, NC residents: on Monday call and email your legislators, in particular, the following key individuals:

Representative Paul Leubke
email: Paul.Luebke@ncleg.net
(919) 733-7663

Senator Tony Rand
email: Tony.Rand@ncleg.net
(919) 733-9892

Representative Bill Owens
email: Bill.Owens@ncleg.net
(919) 733-0010

Representative Henry M. Michaux, Jr.
email: Mickey.Michaux@ncleg.net
(919) 715-2528

Senator Daniel G. Clodfelter
email: Daniel.Clodfelter@ncleg.net
(919) 715-8331

Senator Floyd McKissick
email: Floyd.McKissick@ncleg.net
(919) 733-4599

Feel free to cut, paste, and personalize the following template:

Subject:  I Oppose the Sales/Use Tax Nexus bill
Dear [Your representative]

My business will be devastated by the sales/use tax nexus bill. I am being discriminated against because I make my living by selling advertising on my website.

[Insert description of your business and how you earn a living from affiliate marketing. Include earnings state income taxes you paid last year, if you so choose, number of employees if applicable. And include links and screen shots. Keep it short!!! ]

This law would be futile: my partners will sever their advertising relationships with me; my income will be devastated and North Carolina will not collect sales tax anyway. I respectfully ask you to remove the sales/use tax nexus clause from the budget bill.

Sincerely,

[Include name, business name and address]

Finally, a journalist that understands!

Wall Street Journal

Tarheels vs. the Internet

North Carolina legislators committing a flagrant foul against consumers.

Visiting college basketball teams usually don’t enjoy playing in North Carolina, and now Internet businesses don’t want to compete there, either. But while the state’s hoops programs are a source of pride, a new Internet tax isn’t going to win fans among North Carolina consumers.

The U.S Supreme Court’s 1992 Quill decision forbids states from forcing tax-collection obligations on out-of-state merchants, but Tarheel legislators still want Amazon and other online retailers to start taxing their constituents. The Seattle-based retailer has no physical presence in the state, but a pending North Carolina bill holds that since affiliate Web sites in the state link customers to Amazon, the company is now responsible for extracting cash from Carolina shoppers. Other proposed North Carolina legislation would apply a new tax only to Internet ticket resales, in direct defiance of the federal Internet Tax Freedom Act, which prohibits taxes that target the Internet with burdens not applied offline.

To its credit, Amazon yesterday refused to accept the expected new compliance burden and announced the cancellation of its North Carolina affiliate relationships. Said the company, “This is a direct result of the unconstitutional tax collection scheme expected to be passed any day now by the North Carolina state legislature (the General Assembly) and signed by the governor.” So now the state won’t get the revenue, even as in-state Web retailers lose their ties to Amazon thanks to the legislature’s revenue grab. Brilliant.

Hello Affiliates! Here is the latest on our nation-wide fight against anti-affiliate legislation.

California

AB 178 has returned in a budget package that is being considered by the Legislature. On Monday, June 22, a lobby day was held. More information about the legislation and lobby day in Sacramento can be seen on our previous post here: http://www.performancemarketingalliance.com/2009/06/25/california-legislative-push-for-thursday-june-25th/. The latest news is promising in the sense that we may have more time to act. On Wednesday, both houses of the legislature were unable to agree on the budget bill. The Assembly is meant to reconvene on Saturday, but that may not happen. Later today, the Senate will decide whether or not to reconvene over the weekend or wait until Monday. In the mean time, the PMA would appreciate it if you continued to send in letters to your representatives about how the Nexus Legislation will negatively impact you, your business, and therefore the State. A template and contact information can be found in the link to the post above.

Rhode Island

The HB 6164 has been placed into the budget package that is being considered by the legislature. As part of a budget package, it is much more difficult to lobby against a certain section of the package, such as the Amazon tax, and have it stricken from the bill. On June 24, 2009, the House passed the budget package. An article about the budget package, which can be seen here: http://newsblog.projo.com/2009/06/full-morning-ve.html, states the following:

“The Senate, which is set to vote on the budget plan Thursday afternoon [June 25], does not traditionally change the budget bill. It could be on the governor’s desk by Thursday evening. House Minority Leader Robert A. Watson challenged Governor Carcieri, a fellow Republican, to veto the bill.”

If the Senate passes the budget, the only hope to defeat it is by a veto from the Governor. A template in opposition to the Amazon Tax can be found here: http://www.performancemarketingalliance.com/2009/05/11/hello-rhode-island/.  Please use the template, reformatted appropriately, to contact Governor Donald L. Carcieri. His e-mail address and information can be found at his website: http://www.governor.ri.gov/contact/.

North Carolina

State politicians in North Carolina have until July 1 to pass a state budget, and right now it looks like the affiliate tax will very much be included. We at PMA are sorry to report that, because the proposed budget contains the Nexus Tax, and even though it has not passed yet, Amazon has officially closed their accounts with Associates in North Carolina. Other retailers may follow suit, but until the budget passes, the fight is not over. A petition has been created by Matt Enders, an NC Affiliate, in opposition to the NC Affiliate Tax. You may sign it here: http://www.petitionspot.com/petitions/ncaffiliatetax/. Please contact your representatives as well and let them know how this legislation will not only negatively impact you and your business, but how your loss of income will negatively impact the state of North Carolina. You can look up your members here: http://www.ncleg.net/GIS/RandR07/Representation.html. Feel free to cut, paste, and personalize the following template:

Subject:  I Oppose the Sales/Use Tax Nexus bill
Dear [Your representative]

My business will be devastated by the sales/use tax nexus bill. I am being discriminated against because I make my living by selling advertising on my website.

[Insert description of your business and how you earn a living from affiliate marketing. Include earnings state income taxes you paid last year, if you so choose, number of employees if applicable. And include links and screen shots. Keep it short!!! ]

This law would be futile: my partners will sever their advertising relationships with me; my income will be devastated and North Carolina will not collect sales tax anyway. I respectfully ask you to remove the sales/use tax nexus clause from the budget bill.

Sincerely,

[Include name, business name and address]

Hawaii

Information from Hawaii has been slow in coming and the latest has been rather confusing. According to some, Governor Lingle has missed the deadline to veto the bill, HB 1405. However, others have a different deadline date. So whether or not the bill has been signed or vetoed is still unknown at this point, and the deadline to do so is also unknown. We are working to unravel this mystery and will keep you updated with the latest information when we receive it. Update! Governor Lingle has until 7/15 to sign HB 1405. She is announcing on June 30th if she will veto the legislation or not.

***

Thank you everyone for your hard work in the state-by-state fight of this legislation!