On the same day that the Governor of California vetoed the Advertising Tax from their budget, the governor of Hawaii did the same.

For Immediate Release: July 1, 2009

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 .

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What’s equally amazing is that both governors saw fit to issue press releases on this issue, both calling out the reasons that it would hurt business in their states, putting their resident businesses at a competitive disadvantage to other states not being able to do business with the likes of Amazon.com and Overstock.

They got the message and the point. Now how about you governors in Rhode Island and North Carolina?

Post from: Jangro.com

Aloha Advertising Tax!

07/01/2009 GAAS:355:09 FOR IMMEDIATE RELEASE

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.

I’m not completely up on my politics, but I suppose that his veto can be overruled by congress. But given the tone of this press release, it seems like this one is pretty solid.

Congrats to all the folks in California who put incredible effort to get the affiliate word out to the legislation. Arnold clearly got the message that small business would be harmed by this action.

Source

update: Letter from Overstock to CA Affiliates

July 1, 2009

Dear Affiliate:

We are delighted to inform you that we have reversed the decision to terminate our contracts with our California-based advertising affiliates. Our Chairman and CEO, Patrick Byrne, today received a call from Governor Schwarzenegger’s Office and the Governor’s Office assured us that the Governor’s actions of last night will stand. He sent back to the legislature the revenue package, rejecting new tax initiatives, including that which provoked our termination notices. The Governor has pledged that there are to be no new taxes enacted this year, and the budget must be balanced by government cost-cutting.

We also were told that the Governor recognizes this is an issue that impacts California’s reputation for business which the Governor prefers to remain strong.

We were asked to reverse our decision of yesterday, and we happily obliged, based on these assurances. We will begin the process of canceling the expirations initiated last night and hope we do not have to revisit this issue again.

We apologize for any disruption of your business owing to these events, and thank you for your support of our position. We believe that the contacts received by the Governor’s office on this issue today were chiefly responsible for this turn of events.

Respectfully

Jonathan E. Johnson III
President
Overstock.com, Inc.

Post from: Jangro.com

Advertising Tax Vetoed from the CA Budget

Watching the publisher-residents of these states fight this legislation after it already has strong momentum has been both inspiring and disheartening. How legislators can propose and pass laws that destroy small business while the merchants that it targets can dodge it (by destroying said small businesses) is beyond me.

It is time to get proactive about this and send an email to my own state representative and senator, just in case they’re considering the same in Massachusetts. Earlier this year I was worried that by doing so I’d be giving them ideas. But by now, they cannot have possibly NOT heard about the action being taken by several other states. I think it’s riskier to remain silent.

I am yet to see any examples of letters sent to state reps in a preemptive manner. So I drafted one up. Please feel free to use this for your own state reps, though I encourage you to customize with your own story.

Subject: Advertising nexus laws and the risk to small business

Dear Senator Eldridge,

I am the co-owner of a small business in your district. My company employs 4 people in the state of Massachusetts. We publish websites that allow people to find, share, and discuss products that are available from e-commerce websites all over the Internet. We earn money through advertising on a performance basis, also known as affiliate marketing. We do not sell products.

There are currently a number of states that are forming and passing legislation that targets this type of advertising in such a way that it establishes nexus requiring out of state merchants to collect sales and use tax from residents of those states. New York was the first and passed a law last year dubbed the “Amazon tax”. There are a number of states in the process of doing the same, including Connecticut, North Carolina, California, Hawaii, and others.

While I understand that states are in financial crisis and wish to require as many merchants to collect sales tax as possible, the basic flaw in this legislation is that the merchants can avoid it by terminating their advertising relationship with all publishers in the given state; they are doing this. The publisher businesses cannot avoid it; they get hurt, taxes don’t get collected.

For example:

- Hundreds of advertisers terminated their relationship with thousands of New York state publishers when the law was passed last year. As a direct result of the terminated relationships, many New York publishers were forced out of business.

- Dozens of merchants recently terminated relationships with Connecticut publishers based merely on the speculation that the legislation would pass there.

- Just last week, Amazon terminated their relationship with all publishers in the state of North Carolina which has added similar legislation to their pending state budget. That letter from Amazon to NC publishers can be seen here:
http://www.marketingpilgrim.com/2009/06/amazon-calls-nc-lawmakers-bluff-cancels-affiliate-program-early.html

- Last week, Amazon followed through with their threat and terminated their relationships with Hawaii advertisers.

The supporters of this legislation are rallying behind the idea creating a level playing field between online and offline merchants. And while “sticking it” to Amazon and other online merchants might seem like a righteous thing, it has been proven that it severely harms thousands of businesses like mine while the big merchants can avoid it.

How can states pass legislation that will put their resident businesses at risk?

Several states have realized that these new advertising nexus laws are not the answer to balancing their budget. States like Minnesota and Maryland, have realized the gains do not outweigh the losses. The income gained from the sales tax does not compensate for the loss of income tax from the small businesses which are forced out of business. Even if these small business owners can stay in business, their income is significantly reduced. Less income not only means less income tax, it means less spending, less investing, less growth. For the small business owner such as me, it could also mean cutting back on benefits and reducing the number of employees. All of this is detrimental to individuals and to our state. Small business owners are a critical part of our economy.

If Massachusetts was to pass similar legislation, any of the dozens of merchants that advertise through us could terminate us based merely on the state that we operate in. Nearly 100% of our revenue comes from out of state merchants. This could put us out of business. There are thousands of individuals and businesses in this state with similar advertising models.

This is a critical issue to my business. As other states have contemplated advertising nexus laws, publishers such as myself, have learned that many legislators did not realize the impact of the proposed legislation, nor did they quite understand our business. We have spoken before legislators of several states in both public sessions and private meetings. We have found it is more efficient to hold these meetings in advance of any proposed legislation. I would like to meet with you to discuss this issue further and will call to schedule a meeting.

In advance of my call, your staff can contact me to schedule a meeting or for more information. I may be reached at 617-xxx-xxxx.

Thank you for your time and I look forward to meeting with you.

Sincerely,

Scott Jangro
President and co-founder
MechMedia, Inc.
Stow, MA

I’ll follow up with my experience as I contact and hopefully meet with my representatives.

Post from: Jangro.com

Getting Ahead of the Advertising Tax

Affiliate Manager:

I wanted to let you know that we strictly prohibit direct linking to our website from search engines. Please update any campaigns otherwise we will not be able to continue working with you via Commission Junction.

Thanks,
Jane

Me, after mustering up the team to make sure we weren’t doing this:

Jane,

We are not doing any direct linking to [your site].

What makes you think we are?

Scott Jangro
MechMedia, Inc.

Affiliate Manager:

Scott,

Great! We didn’t. We just saw your sales pick up and wanted to ensure you knew our keyword policy.

Thanks,
Jane

Are you kidding me?

What’s wrong with this world when affiliate success is met with an initial assumption that we’re doing something wrong?

I can think of a dozen ways in which she could have emailed us in a positive way, but while ensuring that we weren’t doing something wrong. That perhaps would have resulted in our doing even more to promote them instead of their competitors.

Now I’m just annoyed at them.

(And, “Jane”, if you’re reading…no offense, really.)

Post from: Jangro.com

How not to Congratulate Affiliates for Working Hard to Increase Sales

I’m sure you’ve seen this, but I wanted your latest thoughts/updates on the tax issue. I’m also not clear on how this is handled. Who collects and how?

http://www.forbes.com/forbes/2009/0525/042-internet-taxation-software-digital-tools.html

For our program right now, CJ’s agency model looks like it would fit us best. I just get discouraged before I even begin when I think about the tax issue.

The tax issue is one purely of tax nexus, or physical presence.

Say you’re a local brick and mortar store in Ohio. You must collect sales tax on all eligible purchases, assuming your state has a state sales tax, of course. Technically it is the consumer that owes the tax to the state, but to simplify, merchants are required to collect the tax and give it to the state. Merchants don’t “pay” the tax, they just *collect* it.

Moving this model online, it gets more complicated. Since there is no physical store locations, as a compromise, if you’re an online merchant, then you must collect tax from consumers who reside in your state. So if you’re based in Ohio, and a shopper from Ohio buys something, you must collect tax from them. You don’t have to collect tax from any consumers from anywhere else in the world.

Because you’re based in Ohio, you have a physical presence there and that gives you nexus. If you have an office in California and a warehouse in Kentucky you have nexus in those two states as well. Therefore, you must collect tax from consumers from OH, CA, and KY.

That’s (over)simplified internet ecommerce tax law. So where do affiliates come in?

ALL states need money these days, and they want to collect sales tax from their residents who shop online who technically owe sales tax on everything they purchase anyway. The only practical way to get it, however, is from the merchants. So the trick is to find a way to establish nexus in their state for as many merchants as possible.

New York State was the first to identify the affiliate marketers as a way to do this with a twist of language, calling them a commissioned sales team. That law passed and has been in place for a year. This resulted in dozens if not hundreds of merchants dropping their affiliate program rather than going through the effort to collect tax from NY residents.

Since then, several states have tried to copy the concept. This time the affiliate community and anti-tax groups were ready for them and put on strong resistance. In nearly all of the states this has been raised, it has been killed or delayed thanks in no small part to the efforts of a small group of affiliate marketers.

The threat is by no means gone and affiliate marketers need to keep a close watch on legislation to make sure it doesn’t sneak its way through anywhere. It can come back in any state that has already raised it, and it can appear in new states as well.

What does this mean to you as a merchant? Basically, it means that you need to prepare for the possibility that you will need to collect sales tax from residents of more states than you may have originally planned. This typically means having the appropriate ecommerce software in place to do the right thing. The pain comes mostly to the well established merchants who are blindsided by this and are forced to act quickly to get into compliance. If you’re prepared, there really should be little impact.

How can you help? Join and support organizations like the Performance Marketing Alliance and AffiliateVoice who are working against this legislation. Money is needed to hire staff to stay on top of legislation. The PMA, for example, is currently building a team of people to do just that.

Post from: Jangro.com

Concerns over Affiliate Program Taxes?

I hear a lot about “link cloaking” and that I should be hiding my affiliate links to keep them from getting hijacked. Is this true?

– Joe S.

What is Link Cloaking?

Link Cloaking is the technical practice of hiding an actual URL through a link on the local domain, or a through a benign third party domain.

URL shorteners, which we’ve all become so familiar with thanks to services like Twitter, is probably the most commonly seen link cloaking. When you use a service like bit.ly, tinyurl.com, is.gd, etc., you’re technically cloaking links.

Why Would You Want to Cloak Links?

Most people use URL shorteners so that they simply make long URLs more manageable. If you’ve got a big long URL to a product on an ecommerce website and you want to put it in an email, a nice short URL that redirects to it is much easier to manage. URL shorteners become mandatory when using a service like Twitter where you’ve only got a very small number of characters to write a message.

Affiliate Marketing is sort of a special case where there are several other reasons that people want to cloak their affiliate links.

• Hiding links from users — there is a belief that consumers are becoming sensitive to the existence of affiliate codes in links and therefore a fear that they will work to bypass the affiliate tracking link by going directly to the merchant site manually. There may be some truth to this.
• Hiding links from search engines — some believe that search engines will look for fingerprints of affiliate links on websites to identify them as affiliates. Cloaking links can remove these fingerprints and hide them behind what looks like a local URL. It’s a good idea to put these links in the robots.txt file so that search engines won’t even try to follow them.
• Prevent passing of “Link Juice” — this works; URL shorteners use 302 redirects which are “temporary” redirects. Search engines generally discount any weight associated with these links.
• Hiding links from “hijackers” — this is bunk, and generally used as a fear technique to sell software. Any spyware or other software that is designed to “hijack” clicks isn’t looking for affiliate links to replace the ID in. They’ll be looking at where the click ends up and will do the hijacking there. Cloaking links will not stop this activity.

How do you cloak affiliate links?

If you’re just cloaking a single link, the easiest thing to do is use a URL shortening service. TinyURL is the first service like this, but it has been overtaken by newer services fueled by the high demand for these services fueled by twitter. There are many, many services that add great features like custom URLs, click stats, header frames, etc.

If you’re routinely cloaking links on your own websites, you’re probably going to want to either set up a procedure on your own server, or even do something to automate this.

You can set up redirects manually in your .htaccess file, get a redirector or cloaking Wordpress plugin (if you’re using Wordpress), get a third party URL shortener that you can host on your own server (like Shorty), or build something custom.

Most of our links are run through our own custom redirector for the purpose of tracking clicks. This has the secondary benefit of cloaking the link as well.

The technical details on how to cloak links is too much for this post, but I’ll follow up with a post on a few methods of cloaking that you can easily do yourself.

Post from: Jangro.com

Link Cloaking, What is it?

I previously removed it because I was getting a ton of questions from visitors with DLP TV repair questions, when I was really hoping for affiliate marketing questions.

But now, I want to write more here and I just don’t have enough topics that come to my mind as interesting to write about. So I’ll write what you suggest. I’m hoping to focus on affiliate marketing, web development, running a small business, and tech but I’m ready to embrace whatever it is readers want to hear about.

So if there’s any question or topic that you’d like to see me tackle, please submit it on the “Ask Jangro” form.

Post from: Jangro.com

Ask Jangro

One mistake can cost you all existing incoming links and any search engine rankings. Not something to be taken lightly.

But I took the leap today here on Jangro.com and here’s how and why I did it.

Way back when I set up this blog, I chose poorly when setting up my permalink structure. My old url format was:

/a/%year%/%monthnum%/%day%/%postname%/

I don’t even remember why I put that ‘a’ in there at the beginning. I guess maybe I shortened the wordpress example of having /archive/ at the beginning. I’ve dreaded this decision for years now as I wanted to have a cleaner structure.

Today I switched to a simpler, more keyword rich, structure:

/%category%/%postname%/

and I hope with some good category names and post titles, I’ll get some improved traffic to the pages on which I look for natural search rankings.

For example, this URL

http://www.jangro.com/a/2006/08/03/how-to-change-your-samsung-dlp-lamp-in-5-minutes/

is now

http://www.jangro.com/electronics/dlp-tv/how-to-change-your-samsung-dlp-lamp-in-5-minutes/

When switching to a category/postname based permalink structure, you need to be careful of a few things. First, make sure all your posts are categorized. And second, make sure if your posts are in multiple categories, the one you want is lower in the sort order of their IDs. The latter can be difficult, so it may be easier to just put posts in a single category. I went through 30 pages of posts to clean this up.

Also, before changing the permalink format, I made sure I had the redirects in place. This is very easy with a plugin called Dean’s Permalinks Migration. I’m not sure exactly how it works, but I do know that wordpress posts have their permalink stored in them. So this plugin must detect a page not found, then go looking for the old permalink in the post table.

I also tested it in conjunction with the very popular “Redirections” plugin and it seems to be working great.

I’m optimistic that with some good 301 redirects in place this change will have only positive effects.

Post from: Jangro.com

Changing Permalinks in Wordpress Doesn’t Have to be Scary

Affiliates, who are the constituents directly impacted in these states have sprung to action with incredible impact. A strong group of California affiliates have mobilized to put a stop to that bill. Stephanie Lichtenstein has put forth a great resource with a series of posts on her blog and with the facebook group that she’s created. Further, new industry associations, the PMA and AV have been stepping up to get people educated and motivated to act.

But in addition to those grassroots efforts, there’s some real weight to be thrown around by the affiliate networks. They have the funding, corporate counsel, and in some cases lobbyists to make a real impact. But perhaps more importantly, they have real data.

Only the affiliate networks can paint a full picture of what it means to pass legislation that affects affiliates and publishers’ businesses, and Linkshare has done an amazing job with this on their own blog. With a brilliant use of Google maps and publisher address information, a picture is worth a thousand words for sure:

California

Florida

Maryland

Ever wonder what value an affiliate network is adding to the affiliate marketing ecosystem? Here’s a big one. I don’t know how any legislator can ignore this information.

This is just one very visible example of what one network is doing. I know that the others are providing data, visiting legislators, writing letters, signing on to support coalitions and organizations, and sending emails out to affiliates in the states that are affected.

Great stuff, and thanks to the affiliate networks and merchants for stepping up, even though they are not necessarily based in the affected states.

Have you asked what you can do? And are you doing it?

Post from: Jangro.com

Affiliate Networks Doing Their Part

In it, Amazon expresses their clear opposition to Maryland’s version of the “Amazon tax”, and the actions they’ll take if it passes, which is to drop their Maryland-based participants in the Amazon Associates program, as they threatened to do in Hawaii.

This ultimatum by Amazon is strong, but it only speaks to the revenue that Maryland will not get from Amazon. Maryland’s increased revenue may be lower than they expected, but they may see it as still more than what they get now.

The Maryland legislators also need to hear from real Amazon Associates and other publishers based in Maryland who will be affected in the same way.

Lower than expected revenue due to actions like Amazon’s combined with the impact that this will have on MD small business cannot be ignored. If you’re a publisher in MD, let them know that they will harm your business if they pass this bill.

Post from: Jangro.com

Amazon’s Letter to Maryland Senator Currie