Archives for March 2011

With the stroke of his pen, Illinois Governor Pat Quinn sent a strong message to small businesses that they are not welcome in his state.

The hostile signal from Governor Quinn came by signing HB 3659 into law, which forces out-of-state retailers to collect Illinois state sales tax for Internet sales, based on the view that affiliate marketers constitute a tax nexus for the retailers.

Noted “Mom & Pop” advocate Walmart applauded Pat Quinn’s move to send scores of IL entrepreneurs to the unemployment line.

How, you ask, would this legislation, which carried the misnomer of the “Mainstreet Fairness Bill”, put people out of business? Well, the target of this law is Amazon and other online retailers who do not have a physical presence in Illinois.

Here is how similar legislation has played out in other states… Amazon removes the affiliates of that state from their affiliate program, so they still do not assume a tax nexus, which means no additional tax revenue collected.

But wait, there’s more! Now there are scores of affiliate marketers who have been fired from Amazon and countless other online retailers. That’s a big chunk of income and income tax that has vaporized.

And that income that no longer exists can no longer be spent in Mainstreet Illinois.

Let me break this down for the IL lawmakers and Governor Quinn: you’ve created a net loss for your state.

Brian Littleton, founder and CEO of Chicago-based ShareASale, an affiliate marketing network that will see a huge negative impact from this legislation, had this to say…

“Let us remember that the reason the bill was written was to collect revenue for the State of Illinois. This bill does the opposite.

Because out-of-state retailers – and we are not talking about just Amazon – but any and all retailers can simply terminate their affiliate programs in Illinois, thus removing themselves from this bill’s grasp, no revenue will be collected. That means no revenue, lost contracts for Illinois businesses, lost jobs in Illinois.

It is entirely unfortunate that the Federal government has not acted on this issue as everyone on all sides of this issue knows that it is truly a problem that only the Federal government can solve. Unfortunately, Governor Quinn jumped the gun on this. Despite the fact that we’ve been in communication with Senator Durbin’s office, who indicated that this exact issue would be considered during this session – the Governor’s early action will make that all moot as the damage will already have been done in Illinois.

As we speak, Illinois affiliate marketers are being forced to pack up their businesses and move to another state. Through a bill, which started with a lack of understanding, and finished with poor judgment – Governor Quinn has spoken unequivocally that the growing, innovative, job-creating industry known as affiliate marketing is entirely unwelcome in Illinois. Where we were once poised to become the “Silicon Valley” of the Midwest, we are now forced to look to other states. We have confirmed that neighboring state Governors and Lt. Governors have been in direct contact in an attempt to woo affiliate marketers to their borders.

Governor Quinn has instead decided to side with big-box retailers – those who destroyed main street in the first place – in an issue of “fairness”. This bill helps Walmart, Target, K-Mart etc… this bill does not help Ma and Pa booksellers who were simply being used by the big-box retailers to put a better face on the issue. When this bill becomes a law in July of 2011… there will be no increased revenue for Ma and Pa on Main St.; there will be no more people shopping on Main St. as opposed to online; and there will be no more a fair level playing field for Ma and Pa than there was prior to this bill. Unfortunately, the big-box retailers have fooled Ma and Pa into thinking that they are on the same side – when, in fact, they never will be.

The irony is that during his last budget address, the ink still not dry, Governor Quinn setup a Technology Council designed to foster growth in the growing Tech community of Illinois. Unfortunately, the very first thing he did was pass a bill that a) isn’t fair, b) doesn’t create any revenue for Illinois, and c) kills job growth in an industry that he wished to grow.

Here are two critical things that have to happen now.

1. The State of Illinois Dept. of Revenue MUST setup a mechanism to track new revenue coming in from this bill on July 1st. If the Dept. of Revenue fails to do this, it will be an irresponsible lack of action – piling on to the already devastating loss of jobs in Illinois.
2. The Federal government, specifically in Illinois the office of Senator Dick Durbin must take great care in looking at this issue – as there is still time before July 1st where he can save the State of Illinois from the unfortunate actions of the Governor.

Fairness? What is fair about eliminating a whole bunch of jobs in Illinois.

Here’s how this goes:

• The bill passes.
• Amazon terminates affiliates.
• Other merchants do the same.
• Affiliate-powered businesses large and small are decimated.

No revenue is collected, Ma and Pa are still being hammered by big-box retailers, and nobody benefits.

Tell me. How is that fair?

But hey, at least Walmart is happy.