Today marks the first time a merchant closed down their entire affiliate program because of the various state legislations taking on the Advertising Tax.

If you’re an affiliate who has moved your business to another state, of if you’re sitting in a no-sales-tax state like New Hampshire thinking that you’re untouchable, you’re wrong.

This letter came from Drs. Foster and Smith to all affiliates today (bold is mine):

It is with great regret that we have to inform you that we are shutting down affiliate marketing at Drs. Foster and Smith effective immediately February 22, 2010. This closure is across the board in all states with all affiliates and is not related to you only as one of our affiliates.

We regret having to do this for a variety of reasons, not the least of which is that so many of you have done a great job for Drs. Foster and Smith and will be adversely affected by the loss of revenue from Drs. Foster and Smith sales. Thank you for all you have done to promote our company on your web sites. We apologize for the hardship and inconvenience that this creates for you.

The single reason for the decision at this time is the moving target of the ever-growing patchwork quilt of state legislatures that are considering nexus legislation relative to affiliate marketing and sales tax. It has become increasingly difficult to determine who is considering such laws, where they are in the process and what the ramifications are in each state. What affiliates may not be aware of is that such nexus situations do not only relate to sales tax collection, but potentially state income tax for a corporation as well.

We wish there was clarity on this issue from state to state and nationally, but there isn’t. So until this matter is cleared up nationally, we are shutting down all affiliate marketing. We apologize for any hardships this brings to you and your team. We have greatly appreciated the work that you have done on our behalf. The sudden nature of the move by California to reintroduce legislation late last week and to push for a quick vote, emphasized the ever-changing nature of this issue and our need to be ahead of such votes and decisions.

With our appreciation for your contribution to our company,

Sincerely,

Drs. Foster and Smith Affiliate Marketing Team

This isn’t just happening to NC, RI, and a few other states. It is officially happening to all of us.

They are SHUTTING DOWN AFFILIATE MARKETING.

More here and here.

Get involved.

There’s been a great movement this past week of people creating videos speaking out against the advertising tax. I think this is fantastic and few things would speak louder than a whole bunch of these videos.

Listen to these videos from affiliate marketers speaking out against the advertising tax.

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There is currently legislative activity going on in several states including California, Nevada, Virginia, Oklahoma, Vermont, and Illinois. These states are at risk for passing the ad tax in the next several weeks as these states are desperate for money, if only on paper, to balance their budgets.

If you are from one of these states, it is urgent that you make your voice heard. See the PMA website for actions you can take and to sign up to be on the email list to get more information specific to your state.

If you haven’t seen it by now, CJ has put together a very nice resource page sharing all the information they’re gathering. Commission Junction clearly has some serious resources on this issue, as I know all the networks do, but it is great to see some very visible results of these efforts.

• A US map with CJ’s own risk assessment
• A stream of updates on any activity in any state
• You can subscribe to an RSS feed of all updates

You can see from the current map that things are potentially heating up in California, Nevada, Oklahoma, Illinois, Vermont, North Carolina, Florida, and Alabama.

There are many resources available to keep tabs on the Advertising tax. This is a great one.

See the entire resource here.

Are you seeing more ads from your friends on Twitter? Several of the people I’m following on Twitter are pushing ads through their Twitter streams. I assume they’re using services like Sponsored Tweets, though they could simply be affiliate links.

First, this post isn’t meant to be critical of their activity. It’s just got me thinking about this means and how we perceive the things that our friends say and recommend online.

None of the ads that I’ve noticed have actually offended me. In fact, they were particularly relevant this past weekend. On Friday and Saturday I saw some reminders to buy flowers. Today I saw one promoting tax preparation.

But I wonder if these people are personally recommending these products? Have they used them? Or do they just have space for sale on their twitter streams?

I’m all for making a buck and if my friends are popular enough in the social media space that they can sell spots on their clothes, cars, or twitter streams for cash money, that’s great.

But to me there’s a difference between wearing an ad on your shirt or having it plastered on your car and having it appear intermixed with your ordinary conversations.

Dale Jr. wears Amp Energy drink, National Guard, Budweiser, and a dozen more ads on his clothes and cars, but I doubt he works them into his conversations. I’d bet that Phil Mickelson has never uttered the words “Bearing Point” while chatting with his buddies at the 19th hole.

That would probably become pretty annoying if he did that.

And how do we tell the difference between a real recommendation and a bought one? At what point do we stop trusting that our friends are providing completely unbiased recommendations?

After a day of Google Buzz, you’re probably starting to form your own opinions.

Many have called it a Twitter killer. Others claim that it is making a play on Facebook. Calacanis stated that Facebook’s valuation dropped in half yesterday.

Personally, I absolutely love it. Here’s why…

It is integrated with GMail. I’m in Gmail all day anyway, so having easy access to it is perfect for me. I realize that this isn’t true for many, and for them there will probably be desktop clients that integrate with Buzz. There is already an API. I predict that Seesmic will be first to market with this integration.

Conversations. If you’ve been using Buzz for the past day and don’t immediately see that the one thing that Twitter has sorely missed is conversations, then there is no hope for you. Go back to Eudora. The conversations that I’ve been involved in are fantastic. Buzz has got me in touch with people who I haven’t conversed with in months. It’s also got me talking to people who I have never even met before, friends of friends.

FriendFeed did most of this, but adoption was poor. FriendFeed does most things better actually, that I hope Google will incorporate somehow.

That’s it. It really isn’t anything more than that.

Danger!

There are a few risks to Buzz. First, it exposes your Google profile and Gmail account. This was already out there if you created a pretty URL for your profile.

Mine is http://google.com/profiles/sjangro

If you want one that doesn’t look like your car’s VIN, edit your profile and way down the bottom, you can select the pretty version:

Also, unless you explicitly set up a private Buzz, what you write is entirely public information. They are visible on your profile, and every Buzz has a “permalink” and Google is indexing buzzes.

This is no different from Twitter, but I think that it is much more obvious on Twitter that what you’re saying is visible to the world. Since Buzz is much more intimate, you may fall into a false sense of security that you’re only talking to your friends.

If you’re not on Buzz yet, do check it out. It’s a game changer.

Are you reading these Twitter updates from Senator Brophy of Colorado today?

Looks like there is some good news coming for Colorado affiliates, even better than I talked about earlier today…

(times are based on approx 8:30 pm CT Friday Feb 5)

Senator, if you’re reading this, thank you for your support, openness, and most of all common sense!

If you’re reading this, you must know that Colorado affiliates are currently in the fight for their livelihoods.

Last night, the Colorado Senate passed HB1193, the Colorado version of the Affiliate Tax.

There were well over 100 affiliate marketers at the Capitol for the entire day yesterday (some for the entire week) talking to Senators about this bill. They’d been negotiating and working for 15 hours prior to the time the bill reached the Senate floor for discussion.

I wasn’t there, so that isn’t my story to tell. After the folks who were there wake up after an exhausting week, I’m sure they’ll share all the details.

But let me describe what I think went on from the Colorado Government standpoint.

Why are they doing this and why do they not seem to be able to think and act reasonably and logically?

What really happened in Colorado this week?

Like many states, Colorado is in a budget crisis. In Colorado, Democrats control everything, House, Senate, and Governor (who, btw, is a lame duck).

The state needs a balanced budget and the democrats have put together a package of about 15 tax bills, each bill contributing some amount of money on paper toward a balanced budget.

The Affiliate Tax bill is “worth” $4.7MM toward that budget. Again, on paper.

This, and all the other bills, would pass no matter what. Maybe with some amendments, but they would pass. The democrats would make sure of it. A non-balanced budget is not an option.

The House

This bill started out just like the other states’ Affiliate Tax bills. Standard Affiliate Tax language that would result in Amazon, Overstock, and hundreds of other merchants terminating the affiliates in that state.

However, after the largest showing of affiliates to date at any state’s proceedings on similar legislation, the Reps in the House last week and earlier this week seemed to get the fact that there’s nothing about an online publisher located in Colorado who has a server hosted in, say, Texas, who does nothing to directly target Colorado residents that constitutes “Physical Presence”. Speaking of “constituting”, this was surely starting to feel very un-Constitutional to the legislators.

They reacted by adding an amendment that essentially said that “affiliates” who promoted via electronic means only were exempt from the nexus-creating criteria in this bill. So who’s left? Good question. It’s people who promote in person to Coloradoans and point them to their website to shop at a merchant they have an affiliate relationship with. An example given by the bill’s sponsor was a church pastor encouraging his parish to go to the website to support the church by shopping through their affiliate links.

Now, anyone who knows anything about the affiliate marketing business knows that that leaves virtually nobody who meets the nexus forming criteria. But the wording of the amendment wasn’t really enough. Even though it seemed to neuter the entire bill, it still left merchants exposed to the requirements. Merchants have no way of knowing how their affiliates promote them. And one single affiliate who stands in front of a group of people and promotes their website could “establish nexus”. That’s still too risky.

But that amendment allowed the bill’s sponsor Pommer to essentially wave off the entire affiliate marketing contingent who had showed up in force. He said that every affiliate marketer who showed up there was exempt!

Note, the amendment didn’t change the expected revenue of $4.7MM. How could this possibly be? Again, having this number on paper seems to be the critical thing. Not whether they’ll actually see any of that revenue. Crazy dream world.

The bill passed a voice vote on Friday night, and it passed the standing vote on Monday by one vote. 33-32. A handful of Democrats broke ranks and even one, Rep. Rice, felt strongly enough to stand up and speak against the bill’s passage. He now has zero friends.

The Senate

Next stop for any bill on its way to becoming a law is the Senate. Affiliate marketers, knowing that the amendment wasn’t enough, shifted attention to the Senators.

The Senators have probably rarely if ever seen such a large turnout by a group of interested parties on any given bill. This was surely a week for the history books in the State of Colorado. They couldn’t help but get the message that there are a LOT of business still at risk.

But they were going to pass this bill. It was needed to balance the budget.

However, it seems that they did continue to negotiate to further appease the online-only affiliates and strengthen the amendment that exempts any affiliate who does no physical promotion in the state.

We are yet to see this amendment, but word from the people on the ground in Colorado is that it is well worded to remove the risk from the merchant advertisers. Onus is on the Department of Revenue to identify any affiliate that they are engaging in nexus-forming activity and they will apparently have 30-day notice. Further, merchants will have 30 days after being notified of this affiliate’s activity to remove them from their program.

As expected, the Senate passed the bill onto Appropriations with the above amendment. The amendment hasn’t made its way into the bill yet, there is apparently some process to get that added.

And it isn’t over yet. It still has to get through the Governer, but nobody expects him to veto this. Especially with the amendment language added that exempts electronic-only affiliates.

What Will Merchants Do?

If the amendment bears out and all the above is true, I have a hard time seeing any merchant terminating their entire Colorado affiliate base unless (a) they are taking a strong stance to make a legal point (like Amazon probably feels they must do to support their case in New York), or (b) they are simply misinformed.

Given that the Colorado State legislature was going to pass this bill and all the other tax bills by hook or by crook, this seems as close to a win as we could possibly expect.

The incredible showing of affiliates in Colorado didn’t get the bill killed, but it was changed almost to the point of killing it from our perspective. I’m not going to call it a win until it’s over, but so far it is far from a failure, and folks calling it a failure on twitter and blog posts immediately after watching the hearing live on the internet last night seem to have jumped the gun.

Keep up the good fight Colorado. You guys are so awesome.

And everyone else in a state that has sales tax, pay close attention and prepare. You could be next.

Yesterday, the State of Vermont introduce an Affiliate Tax bill of their own, Bill H.661.

Title: An Act relating to Taxation of Certain Internet Sales
Sponsors: Jeffrey Wilson (D), John Rodgers (D), and Megan Smith (D).

(Vermont Legislature Directory)

There’s no word yet from inside sources on how real a threat this is. It may have strong support (like Colorado) or no legs (like New Mexico, Mississippi, and Virginia).

Stay tuned, and if you are from Vermont, be sure to register your support at the PMA to receive exclusive alerts on how you can help prevent this in your state.

Well, it could be worse.

The Colorado Finance Committee had a hearing on Senate bill 2927 today.

According to Rebecca Madigan, who was there to testify on behalf of the PMA, more than 100 affiliate marketing supporters showed up in force. Rebecca herself almost didn’t make it due to flight issues. After a day of planes, trains and automobiles, she did make it in time to testify thanks to a late start. Sometimes it is good that the wheels of justice turn slowly.

In spite of the strong showing, the bill did pass motion to the next phase of review:

However, the fight isn’t quite over. This particular committee voted (6 yes to 5 no) to recommend that the bill be moved to the next phase of review (the process changed in the morning, still getting details on that). However, two of the 6 ‘yes’ votes have serious questions on the bill and want to learn more. We are trying to figure out the next steps and then will communicate directly with the Coloradoans who have helped out so far. Another letter may be in order!

If you are from Colorado and want to be in the loop on next steps, register for free on the PMA website.

Mississippi is the latest state to jump on the Affiliate tax bandwagon. Senator Tommy A. Gollott of District 50 introduced Senate Bill SB2927, “Use tax; person soliciting remote sales through representatives in this state is subject to use tax.” It was referred to the finance committe on 1/18, requires a majority vote, and will go into effect on July 1, 2010.

Here’s the all-too-familiar text.

Notably, this bill has no minimums (most states state a minimum of $10,000 in sales).

Stay tuned for a reading from folks tied into the lobbyists and legislators on whether this one has legs or not.

In the meantime, if you’re from Mississippi, prepare to contact your representatives.