Update: As per the PMA website: “The ad tax, SB 824, died without being voted on before the end of the 2010 legislative session. ”
I just got wind of this being on the books again this year. Here’s the rundown. SB 824 is stated as being the bill that: “Providing that for purposes of the definition of “engage in the business of an out-of-state vendor” under the sales and use tax law a seller shall be presumed under specified circumstances to have an agent, canvasser, representative, salesman, or solicitor operating in the State for the purpose of selling or taking orders; providing that the presumption may be rebutted by specified proof; etc.”. Let’s do the math here. You’re a small business just starting out and running an affiliate program, and you have 2 affiliates for every state. Let’s assume that this passes in all 50 states. You have to charge sales tax for every sale to every state due to this bill, as opposed to the normal “no taxes on the internet unless you’re in the same state as the supplier”. In some cases, you just lost your edge to the local companies and more important the bigger companies. The internet is the only reason that some of my storefronts are still running and able to compete with local companies, because I don’t have to pay sales tax to those states. On some of my products, the sales tax alone puts me over the price of the local company there because I can’t compete with their bulk purchasing discounts.
The whole point of doing a storefront and marketing it nationwide is to be able to compete in the lower-end dominated areas that are locked up by all other means. Senators Madaleno, Conway, Currie, and Kelley let me tell you a little about myself. I’m a 22 year old entrepreneur that lives in Catonsville. I live in a brand new condo that I bought via my “internet income”. About 90% of that is from affiliate programs and merchants that compete on a national level because they can’t compete locally. I’m a firm believer in helping out this great nation, and due to that I haven’t taken the “easy road” and marketed internationally – I wanted to keep the commerce in the good ol’ USA. Trust me, if I did I’d be making at least 10-20x more than I make right now. If SB 824 passes, I’ll most likely lose 70% of that 90% of my entire income. Not because I represent the company. Not because I’m a “salesman” for the company. Not because I’m a consultant for the company. Because I “recommended” the product to a friend. That’s all I’m doing as an affiliate, I recommend products to other people and if they purchase it I get a “referral fee”. The purchaser never talks to me, I never touch the money that is transacted, and they never hear they’re buying from “Rob” in any way, shape, or form. They’re purchasing it direct from the company. The consumer doesn’t even know that I exist – so why are the companies going to be taxed? By all means I implore you all to do a little more research on what Affiliate Marketing is and how it works, because I do -not- work for the company at all and I do not make sales. I make recommendations.
More importantly, if the companies are taxed as a result of my “promotion” of the products – they’ll take the simple route: terminate me. They won’t let me promote them. If you don’t believe me, look into what Amazon sent to NY, Overstock.com was ready to terminate affiliates in North Carolina, Hawaii, Rhode Island and California, and how they were ready to do the same here in Maryland the last time it was proposed, and I guarantee you, it will happen if SB 824 passes:
If you’re attempting this bill to pass so that you can collect more revenue from these companies, you’re sadly mistaken. Nothing good can come of this at all. The companies will all terminate their affiliates, you won’t collect any extra revenue, and a lot of self employed individuals (as well as those trying to get additional side income) will lose their edge. I can’t see how this is even considered an acceptable bill. If this bill passes nothing good will come of it – heck, you’ll even lose income tax from me.. Most likely I’ll lose my income almost entirely, along with the several people I was about to employ to help manage some of the workload (and by the way, they’re all here in Maryland – which costs me about $20 for every $1 if I went with someone out of the country for the exact same job). But enough about me …
Here’s the information about the tax bill and what you can do to help oppose it: