Virginia Retailers Fighting with Affiliates

A recent Retail Merchants Association Newsletter gives us a more clear look at the opposing lobby's view point of SB 660 in Virginia.  What we like to call the "Advertising Tax Bill" and they like to call "The Amazon Loophole" legislation.

Today the bill passed the Senate 28-12, clearly showing that "their message" that this bill closes a loophole that enables Amazon and other large Internet retailers to avoid paying sales taxes on transactions occurring in Virginia. (The back and forth posted on GoReston.com is telling)

The newsletter though clearly shows that they don't understand affiliate marketing or the impact that this bill will have on Affiliates.  Here is what they say about the opposition:

The opposition, the Northern Virginia Technology Council and AOL, are pushing the message that the bill will cause loss of jobs for affiliates. Affiliates are those who have banner ads on their sites that direct consumers to sites such as Amazon.com.  The VRF contends that no job loss will occur IF those Virginia based internet retailers will collect the sales tax when they have a retail transaction with Virginia consumers.

That is a big IF!  It hasn't happened in other states:

• Overstock Drops Affiliates in NC, RI, HI, and CA
• Amazon cuts Rhode Island, Hawaii Affiliates – Is California Next?
• Amazon Ends Affiliate Program For North Carolina
• Another Internet retailer cuts RI ties over tax

So IF these Internet Retailers act differently in Virginia than they did in ALL the other states who passed similar legislation, THEN the Virginia affiliate companies won't be affected and income and jobs won't be lost.

Affiliate Marketers place advertisements for the Internet retailers, they are not party to any transactions in or out of the state.

This bill is about trying to pass a law that will try to force companies who do not have a physical location in Virginia to pay sales taxes on all transactions in the state by trying to say that their affiliate marketing relationships they have with Virginia affiliate marketing companies makes them a Virginia Retailer.

Many large Internet retailers have already put their Virginia affiliates on notice, if this bill passes, they are going to terminate those affiliates to avoid paying this tax. 

So, while I am all for having a level playing field for Virginia companies, I don't think this bill accomplishes that, and I am concerned about the thousands of Virginia companies who may get harmed in the process or be forced to move out of the state.

Perhaps the confusion lies in the broad use of the term "AFFILIATE" and if legislators understood more about affiliate / performance marketing companies, they would be excluded. 

This Whack-a-Mole game with Amazon is a slippery slope.  If using Affiliate Marketing relationships doesn't work and Amazon cuts their ties with affiliates what is next?  Advertising Agencies?  Direct Mailers?  Consultants?  Resident Employees?

Hopefully this bill will stop in the Congress, or be seriously amended like they did in Colorado to remove Affiliate Marketing Advertisers.  If not, we hope that Governor McDonnell will stay true to his words.