California Repeals Affiliate Nexus Law

On September 23, 2011, California Governor Jerry Brown signed AB 155 (Calderon) into law. This bill repeals the California Affiliate Nexus Law (ABX 128) which was a near death knell for many California affiliate marketers. This is a welcome event for the estimated 25,000 affiliate marketers, including myself, that had been adversely affected by the implementation of ABX 128. It is also an encouraging sign for affiliate marketers in other states that have similar laws on the books or being planned.

Rebecca Madigan, executive director of the PMA said, “The signing of this legislation means these 25,000 web-based entrepreneurs will be able to get back in business. For the PMA, this issue has always been about keeping the vibrant Affiliate Marketing sector of the economy strong and growing.” The Performance Marketing Association (PMA) represents 25,000 web-based Affiliate Marketing businesses in California.

The State of California is suffering it's worst budget crisis in history. In order to fill part of its budget gap, California enacted ABX 128 hoping the tax revenue would help resolve some of its budget woes. As soon as it was signed into law in June 2011, Amazon unilaterally terminated all contracts with it's affiliates in California. Amazon runs one of the largest, if not the largest, affiliate marketing program in the world. Many other online retailers followed Amazon's lead and also terminated their relationships with affiliates in California.

This caused many small and not so small businesses to experience drastic cuts in their earnings. Figures show that 35% of California’s affiliate marketers lost over half their income. Many of these businesses were forced to considering moving out of California for business climates elsewhere that are more conducive to online business. AB 155 repeals the original law for only for one year during which time it is hoped a more permanent resolution can be developed.

Madigan continued, “We would like to thank the Governor and those who worked to forge the compromise within AB 155 for this reprieve. We are encouraging all out-of-state retailers who were forced to stop working with California affiliate marketers to reinstate their California programs. Since AB 155 contained an ‘urgency clause’ the Governor’s signature in essence puts it into effect immediately which means California Affiliate Marketing is back open for business.”

Amazon has responded quickly to this development sending emails to terminated California affiliates inviting them to re-establish their affiliate accounts. They have made this process as easy as possible stating:

"To make your return to the Program as seamless as possible, when you re-enroll, your account settings (login, Associates ID, payment information, etc.) will be the same as they were previously. Traffic you referred while your account was closed won't be eligible for advertising fees."

While this is an encouraging turn of events, much more work needs to be done with the key stakeholders in the area of tax reform to produce a fair and equitable arrangement for all parties. One that does not unfairly target burgeoning online industries.