Worse Than a Google Slap – Colorado HB 1193
As an affiliate marketer, one of the worse things that can happen to you if you are doing any PPC is to have Google slap you and basically stagnate your online business or at worst, put you out of business… But if you’re an affiliate marketer in the State of Colorado, the recently passed Colorado House Bill 1193 is death to your affiliate marketing business…
HB 1193 in Colorado establishes an affiliate “nexus” that allows the state to tax “out–of-state affiliate networks”. This bill allows the state of Colorado to tax out of state retailers that have affiliate programs with state online businesses like me.
The state thinks that this will increase sales taxes that will fund their deficit and give money to schools and other programs that they find having decreasing funding because of lowered money from taxes in this recession… a good thought…
But this law has some drawbacks… Number one is that it is putting affiliate marketers out of business… That means less income tax to the state amongst other revenue decreasing problems….
Here’s the problem with this law… first, it defies the Supreme Court’s ruling via Quill vs North Dakota requiring that a business must have a physical presence and nexus in the state in order to compel that business to collect and remit sales taxes. This means that the state of Colorado is open to law suits that will cost them more in court costs than the sales taxes that they think they are going to collect….
Ahhaaa… the State of Colorado thinks that they have circumvented this problem by assuming that if affiliate marketers reside within the state they form a nexus which represents that company within the state boundaries…
Another problem is that the affiliate programs are pulling out… I have been receiving emails by the hour in the past couple of days from my affiliate programs dropping me with emails like….
“Subject: Removal From Drs. Foster and Smith Program
Dear Drs. Foster and Smith Affiliate:
Here at Drs. Foster and Smith, we truly value the affiliate relationship with each and every publisher, as well as the dedication you have provided the program. Unfortunately, at this time we regret to inform you that we have chosen to remove all Colorado affiliates due to business reasons connected to the pending bill HB 1193. Currently, this law is in effect in New York, Rhode Island, and North Carolina. The removal of all Colorado affiliates will be effective immediately as of February 3rd, 2010.
Again, we appreciate and value your efforts to date and hope that we may again be able to resume the productive business relationships which we have enjoyed with you. We appreciate your understanding in the sudden decision of this matter and wish you the best.
Regards,
The Drs. Foster and Smith Affiliate Team”…
This means that instead of collecting and paying sales tax for the state of Colorado, affiliate programs are withdrawing from the state and Colorado will not gain the tax revenue that HB 1193 was supposed to provide. Thus further decreasing their tax revenue….
It started with my Commission Junction programs then on to my Linkshare programs… haven’t heard from Amazon nor the Google Associates Programs (or others), but am sure I will….
Colorado HB 1193 has inadvertently punished Colorado’s online entrepreneurs. This law has punished anyone having an affiliate link or banner on their website. This includes work at home moms and schools trying to gain extra funding through selling products from an affiliate program.
I don’t think that our legislature has done their research… If they had, they would look to the states that have already enacted such laws… ALL have shown decreased tax revenue instead of an increase. Why? Because affiliate programs simply withdrew from those states…
No sales tax revenue comes in, plus, less income tax from those businesses associated with those programs… a lose, lose situation… No additional revenue…a net loss…
In Colorado, by putting small online advertisers, like me, out of business or cutting into our profits, Colorado HB 1193 will likely lower the amount of taxes that our businesses will pay by more than the amount that the state would have collected with this law…
Way to go Colorado!
Tags: affiliate marketing, affiliate program, Colorado HB 1193
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Posted: February 6th, 2010 under affiliate marketing.
Comments: 2
Comments
Pingback from Amazon vs Colorado – I Got Fired Today as an Amazon Affiliate | Ristvin Marketing Blog
Time: March 8, 2010, 2:30 pm
[...] reported back in February that Colorado HB 10-1193 was going to be worse than a “Google Slap” to Colorado online affiliate marketers. I also [...]
Comment from James@Ice Cream Loveland
Time: April 21, 2010, 3:26 pm
I heard about this. Luckily I haven’t gotten too far into the affiliate marketing yet for it to hurt me too bad. I wonder if this will stick?
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