California Startups: Legislative Emergency

29 Jun 2011

This post is for California based startups - you may still want to read to get more info on what is going on because laws like these are cropping up in other states.

What is Happening:

Last night I was informed that Governor Brown will sign into law the California state budget, including trailer bill ABX1 28

This bill is commonly known as an “affiliate tax”; it establishes “nexus” (an in-state presence) for online retailers that are out-of-state if they are working with affiliates in the state of California.

Who Is Affected By This:

This bill will get you if you qualify for any of these points:

1. You gain any revenue from an affiliate program such as Amazon Associates, any merchant out-of-state in Commission Junction/LinkShare/GAN, etc.
2. If the total amount of sales you have generated for the merchant in the previous 12 months before the bill is signed exceeds $10,000 OR the merchant in total has sold over $500,000 of merchandise to California customers period.
3. If you do not have a fixed IO (Insertion Order) where the merchant specifically asks to advertise on your site and does so with a fixed budget and amount to be spent (this is still shaky, I’m currently getting advice from my lawyer on this).

What It Will Mean:

This bill will be signed into law on Friday apparently. As California is under a Fiscal Emergency, the law will take effect IMMEDIATELY. The moment it is signed, any merchant that has a relationship with you that qualifies in the points above will be immediately subject to fines and/or legal action.

This will result in the immediate loss of any revenue you gain that qualifies.

Who Sponsored This Junk?

This trailer bill is the roll-up of three separate bills introduced in the California legislature this year:

1. AB153, Sponsored by Nancy Skinner, Berkeley. She has tried this bill every single year for 3 years. She has no grasp on the effect this will have on her own constituents (startups in Berkeley) and doesn’t care.
2. AB155, Sponsored by Charles Calderon, East LA. This is another version of the bill above, the guy who put it forth has no clue about how the internet works from what I can tell.
3. SB234, Sponsored by Loni Hancock, Berkeley. This one is the worst of all, as it could qualify any manner of online presence/contracting/advertising as nexus. This thing is nuts and Loni Hancock has literally no clue how this works and doesn’t care a whit about the effect it will have (she said as much).

These bills have been heavily lobbied by Wal-Mart, Target, Best-Buy and Home Depot. They created the “alliance for main-street fairness” to push these bills. The irony, that they helped kill main-street and profess to be helping it, is sickening.

Oh Hells Bells What Can I Do?

Get the word out. There is literally no time to waste. Every single startup that relies on income that qualifies can be affected horribly by this. Tell everyone, I don’t care how, just spread the word.

The situation is dire and while we only have a whelks chance in a super nova to change this, we have to try.