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Governor Quinn Abolishes Affiliate Marketing in Illinois

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Today Governor Quinn in Illinois signed into law HB 3659 which essentially abolishes Affiliate Marketing in Illinois.

 

UPDATE ON THIS STORY:  The law was found invalid by the Illinois Supreme Court.

UPDATE TO THE UPDATE: Illinois is once again primed to abolish Affiliate Marketing in Illinois with Round 2 of an ill-advised “Affiliate Tax”..

It is a huge story of job loss in Illinois. Governor Quinn has spoken unequivocally that the growing, innovative, job-creating industry known as Affiliate Marketing is entirely unwelcome in Illinois. This is directly contrary to actions he took just a few weeks ago during his budget address when he announced the creation of the Illinois Innovation Council to address job growth in the tech community.

How did this happen?


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

Due to the fact that out-of-state online retailers (any and all retailers and not only Amazon) 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, and lost jobs in Illinois.

We need a Federal Solution!


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 has 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 to operate our businesses. 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.

Who does this bill help?


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. It also won’t lead to more people shopping on Main St. as opposed to online; and it certainly will not create more of a 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.

Want proof on who benefits? Hint: It isn’t Main St. Check out who is celebrating?

Wal-Mart welcomes Amazon and Overstock Illinois Affiliatesl

Sears Holdings Applauds

Walgreens Congratulates Illinois

What about the newly minted Illinois Innovation Council?


The irony is that during his last budget address, the ink still not dry, Governor Quinn set up an Illinois Innovation 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 set up 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?

How are they spinning this?


Here is a quote from the press release, out of the Governor’s Office that describes how “fair” it is.

“It’s a matter of fairness. Stores and businesses located in Illinois employ Illinois workers, support community programs, and, through the property, income and sales taxes they pay, allow us to provide vital public services,” said Brian Hamer, Director of Revenue. “Online merchants with affiliates in Illinois should be required to remit the same taxes.”

Unfortunately, what Mr. Hamer fails to grasp here is that the out-of-state retailers won’t simply obey the twisted logic of Illinois. They will simply stop using affiliate marketing advertising – a growing, innovative way to ADVERTISE. Furthermore – this won’t stop them from selling into Illinois at all! Consumers will just click on ads from other States, on the internet there is no concept of “States” … it’s all just out there.

What will that do for fairness ? Well, I am business in Illinois. I pay property taxes, income taxes, and a number of other taxes (it’s hard to keep up). Do I not count in this ruse ? You are harming growing industries.

Here’s another quote:

“Illinois retailers are crucial components of our state economy and our local communities. We need to ensure that those businesses are not at a disadvantage in our modern marketplace. I believe this law is an important step in leveling the playing field for Illinois businesses,” said President Cullerton.

President Cullerton – you have just put all of the affiliate marketing businesses at a decided disadvantage, so much so that we are unable to operate in Illinois. I fail to see the fairness in that.

You are correct in one thing… this is a modern marketplace. One industry, Affiliate Marketing, was a growing, thriving, job-creating industry. You have sacrificed it today for whose benefit? I assure you it is not “Main Street”. Check with the booksellers in a year or so and see how those “new jobs” are looking, or if sales have picked up. Big-box retailers will continue to destroy Main St. … this bill does nothing to stop that. If your goal was to protect Main St., you wouldn’t have sided with Big-box retailers on this issue.

If you want proof that this was really about Wal-Mart and not Main St. …. Check out this piece written by Wal-Mart. Wal-Mart welcomes Amazon and Overstock Illinois Affiliatesl

That’s pretty obvious.

I say all of this with as much respect for our elected leadership as possible. I respectfully disagree 100% with their assessment that this bill is somehow about “fairness”.

Why didn’t they want our help?


We offered the help of our entire industry to find an actual level playing field. The funny thing is – I have nothing against Main St. and they really have nothing against me. I’d love to see a Federal solution to this problem so that everyone could actually have the level playing field that is being talked about.

We offered help, we offered solutions, we even offered two bills which addressed the most obvious issues of tax avoidance (ones that didn’t harm our industry). In the end, this route was chosen and in the press release from the Governor’s Office there is not one single letter that even hints to the fact that so many businesses in Illinois are going to be harmed by this bill. I believe this to be irresponsible and extremely disrespectful to the thousands of Affiliate Marketing businesses in Illinois. Sugar coating an issue with talk of “fairness” does nothing to stop the harm done to our businesses today.

For those Affiliate Marketers in Illinois reading this… know one thing. We aren’t giving up our fight and if you want to join in you know where to look.

Brian Littleton
President/CEO ShareASale.com, Inc.
brian@shareasale.com
(312) 321-0487

Comments

  1. Brian, this is a great article that every lawmaker should be required to read before voting on legislation like this. I fail to see how they don’t understand the truth of the matter. It’s really very simple: this law is so easy to avoid it’s laughable. The merchants terminate their affiliates… done. No taxes. How can they not get that?

    I do have one question: what does this mean, if anything, for affiliate networks that are based in Illinois?

    Reply

  2. Thanks for posting a common sense reply to this nonsense. In July of 2012 (1 year from the date of signing this into law) your elected officials will see the folly of this bill.

    I hope for the sake of small businesses across the state, they will rely more on their foresight, than hindsight, and repeal this legislation. Once the affiliate exodus occurs, it will be too late.

    Reply

  4. Thank you for this well-written analysis of the poor choice made by Gov. Quinn and the lawmakers of Illinois. I agree that not only should lawmakers have to read this article, we deserve an accounting in July 2012 of the “extra revenue” generated. On top of everything else, it seems like this decision will ripple very badly for people on “Main Street” in my area … like the dry cleaner I won’t be paying from my affiliate sales, the tax accountant for my affiliate business, and all the other local vendors who lose when my income goes down. Typical Illinois — between the state government and the weather — remind me again why I live here?

    Reply

  5. I am just disgusted by this. You are 100% right – this is not about protecting small businesses, it is about bowing to the pressure of large box companies. As I pointed out here yesterday, http://www.chicagonow.com/blogs/fantabulously-frugal-in-chicago/2011/03/an-open-letter-to-governor-quinn-please-veto-hb-3569.html, Walmart’s 1-4% commission for affiliates will not even begin to make up for the revenue lost.

    I would like to know what I can do to help fight this!

    Reply

  6. So what are the solutions for IL affiliates? Is it feasible to form an LLC in another state to avoid being dropped? Or do you actually have to physically move?

    Reply

  7. Affiliate marketing or performance-based advertising is just another form of online advertising. This law unfairly targets one kind of internet advertising over another. Advertisers pay for their advertising based on the number of eyeballs (impressions), the number of visitors (clicks), or the number of sales (conversions). Some websites charge advertisers on a CPM (cost per thousand impressions), others charge on a CPC (cost per click) model. Websites that charge for advertising on a cost-per-sale model are not any different – it is just another form of advertising fees. This form of advertising should not create nexus and require collection of state sales taxes.

    Reply

  9. Brian, isn’t there any data from states that have already passed similar laws that proves the bill is based on faulty logic? And that they in fact haven’t seen any increase in tax revenue from it?

    I swear, between this and the unintended collateral damage from Google’s algorithm update… worst week EVER to be an internet business in Illinois.

    Reply

  10. This is terrible. My income will be significantly reduced due to this new law. I have already received a termination notice from Amazon. Thank you Governor, for ruining my online affiliate business that I’ve spent years building. Talk about “fairness”. :(

    Reply

  11. As if Illinois isn’t corrupt enough… Now they are taking away income.. And they recently raised our taxes.. Less income, more taxes… More road construction on the same roads every year, and not the ones that need the work. Raised the price of the toll to use the tollway. I think it’s time to move to Wisconsin

    Reply

  14. This is bull and anyone who does anything online knows it. He’ll end up eating this bill later when all these companies move to other states and all that revenue goes away.

    Reply

  15. What a shame for small business in IL.

    It’s so twisted that the lawmakers and Governor Quinn somehow think Walmart is rooting for the survival of Mom & Pop stores.

    The local booksellers in IL should check whether Walmart swiped all of their copies of The Wolf in Sheep’s Clothing from Aesop’s Fables.

    Reply

  16. this is a joke. I can’t believe IL is so short sited with so many great affiliate businesses in the state.
    this should spark an affiliate revolution. i depend on my affiliate revenue for survival and i for one say we should not be the pawns in this crazy game!
    i am fuming right now….

    Reply

  17. As I see it networks in Illinois create a system to charge the state tax and pay the state wouldn’t that by pass local sales tax? I bet that would piss off constituents. I think this is another political solution to appease voters that doesn’t really work. Now is the state going to create a department to audit the several IL networks?

    I would sit tight and plan for a move while this one works itself out. Texas lost almost 1000 jobs over Amazon moving their distribution center to Tennessee. It takes time for voters to complain and it to work its way to the state house. How long will it take before we see states advertising Internet friendly tax laws to get companies to move there?

    Reply

  18. Great post and analysis Brian. But our lawmakers as dumb as they can get will never understand. You want proof. Read how they are gutting the USA Inc. http://www.kpcb.com/usainc/ an analysis from Mary Meeker. By all measures, USA Inc. is bankrupt with -ve cash flows and -ve net worth and disgusting financials

    Reply

  19. Affiliates in Illinois should be able to work with merchants that already have a presence in Illinois, since they would already be required to collect sales tax. I was thinking it might be a good idea if merchants on Shareasale would be able to list which states they already collect sales tax in, and then affiliates could search for merchants by state to find programs that they could still promote.

    Reply

  20. Wow.. politicians fold to big business regardless who suffers because of it.

    Surprised? You shouldn’t be..

    Only a matter of time before the death of affiliate marketing and heavy Internet regulation begins.

    Don’t believe it.. go research.

    Reply

  21. Amazon has fought the good fight but this will be happening state after state.

    Amazon does have a sales advantage over it’s competitors so in their fight to keep that advantage it’s small business owner/affiliate marketer stuck in the middle getting destroyed.

    Don’t forget to let your representatives in government know how you feel about this and vote them out.

    Reply

  22. well I’m glad I don’t live in Illinois!!! Geez, it seems this guy is trying to be like the other rich dudes that run other countries while their people starve. It’s easy for him to make up all those laws, He has a good job.

    Reply

  23. That is too bad and I think you guys still have time to change and it is weird as US people are facing with jobless situation too. Can Governor offer these jobless people better options to survive?

    Reply

  24. Brian – any ideas where we go from here? I have a couple possible solutions for my own business but in the grand scheme… can we keep fighting for a repeal on this or is it not even worth it?

    Reply

  26. Really Shocked..Don’t know what to say..
    It’s a law or stupidity?

    There is nothing unethical in affiliate marketing. peoples spent so much time to build there business. and some day governor stops all…Really very big DISAPPOINTMENT.

    Reply

  27. This is unreal. The government folks in IL are not the sharpest pencils in a box. I am in Australia and it doesn’t affect me as such but still these sorts of news can shock you sometimes.
    Just saying: “They shot themselves in a foot”.

    Great post.

    Thanks again

    Reply

  28. This doesn’t surprise we, The government wants their share so they can keep up the unnecessary wasteful spending. This really will set precedence for other states to follow. This is what happens when Goverment abuses their power.

    Reply

  29. I too want to know if you have to move out of state or just get an out of state business address like a UPS Suite Number??

    This could put me out of business and I have worked very hard since 2007 to build enough online presents to make very small earnings.

    Reply

  30. This is very sad! For affiliates and hard working people of Illinois.

    I don’t the Governor truly understand what he did and when all those big box stores decide to pick up and leave then he will finally realized how foolish his action was!

    Reply

  31. Brian’s article is quite biased. States are simply trying to collect sales tax any way they can and I can’t blame them since we all want our schools and roads. If we raised corporate and personal income taxes, we could lower sales taxes. But I’m guessing Brian would be opposed to that, too. We are a merchant with affiliates in Illinois. We’ll just pay the sales tax. Seems fair.

    Reply

  32. Steve,

    I am not opposed to taxes – I pay them every year and completely understand the need for roads, police/fire/emergency, … all the things that taxes go towards.

    The problem with the law, as written, is that it does not work – and it harms people.

    That is a lose – lose.

    While I certainly appreciate your willingness to collect tax for Illinois – it is unfortunately a move that most out-of-state retailers will not do.

    This is the central point of our argument. Affiliates in Illinois are losing their livelihoods because out-of-state retailers are not going to just give in to this law.

    If a law A) doesn’t work B) collects no money for the State and C) causes people to lose revenue in their own business….. how can it be considered remotely successful or fair.

    Fair is great, I’m all for fair… but a law has to work as well.

    Thanks for reading and for your comments!

    Reply

  33. This law inhibits commerce. It is against the grain of what is happening throughout the USA. Illinois should be positioning itself as a frontrunner for economic issues and commerce. Chicago is one of our biggest cities and Illinois should be helping to lead our country out of our economic woes, not be acting as a drain clog, preventing the free flow of business and the rights of the entrepreneurs, manufacturers, merchants and consumers. Build Back USA!

    Reply

  34. This is ridiculous. It needs to change. Don’t they know it is 2011? People shop online. There is enough to go around for everyone. This too is a real job. We have worked so hard to get here and now this…with no warning! Does Mr. Quinn understand internet technology? Does he know that people actually need to work? We don’t want to have to move out of state to keep our jobs.

    Reply

  35. Come to Las Vegas, we would love the support. The weather is awesome year round, you have access to great affordable dining, golf, shows, concerts, lake mead, ski Brian Head 3 hours N to Utah, hit the beach in Cal in 5 hours, come to Las Vegas.

    I think what scares them is some of us know we have the power to rank hand in hand with any giant right now. The playing field has been leveled!

    Mark

    Reply

  36. Brian since Share a sale is located in ILL what will happen to this site?
    Will you have relocate as well?

    Any updates on this issue?

    Reply

  37. Here have a lot of info about Affiliate Marketing. I assume that Affiliate marketing overlaps with other Internet marketing methods to some degree, because affiliates often use regular advertising methods. Thanks a lot :)

    Reply

  38. It’s amazing to what end they will go to erode any form of financial sovereignty in this country. The name of the “council” is a dead giveaway that the agenda is the opposite… it’s a ruse that has been pulled over and over again around the world:

    “Let’s set up an organization that says its purpose is to do one thing, and then we will set about doing the opposite while citing the amazing benefits we are going to create for the people.”

    It’s quasi-governmental fascism in the making. The governor is dirty. Period.

    Reply

  40. This seems to be becoming the norm as far as affiliates goes and Amazon. More states seem to heading in this direction which is not good for many people trying to do business with Amazon.

    Reply

  41. Ouch! This will hurt plenty of American affiliates. I really feel for you guys, it’s too bad Amazon and the politicians just can’t get along…

    Reply

  42. Wow!!! I truly feel for affiliates in Illinois and can’t believe Governor Quinn has been obviously hiding under a rock for the last 10+ years!!!!

    What Governor Quinn doesn’t realize is the online world is the new media that will help local businesses thrive and compete on a massive scale…

    Governor Quinn rather than outlawing affiliate marketing in Illinois you should be working on making funds available for small businesses in the state for online marketing education!!!

    Governor Quinn, this legislation will only hurt local businesses and your state’s economy…

    The direct hit will be a loss of revenue from Illinois affiliates because the smart folks will move their affiliate businesses out of state and some will set their businesses offshore further driving the state of Illinois into the ground…

    Governor Quinn, you obviously don’t realize that the old media of Television, Radio and Print Advertising simply is NOT as effective as it was in days of yore…. Climb out from under that rock and take a look around…

    Just my 2 cents on this incredibly insane bureaucratic decision

    Reply

  43. Well this makes it easier for us who live outside US, but still this sounds just stupid. I have noticed that affiliate business is getting harder and harder all the time. And that is not because there are more affiliate marketers but because all of those limitations. Sure, sometimes those limitations are ok, but this is just stupid. It doesn’t help anyone.

    Reply

  45. Nice idea Illinois, but poorly implemented….

    I can understand the need to raise as much tax dollars as possible. But all this will succeed in doing is actually raising less tax dollars….why. Cos the affected affiliate marketers will potentially not promote through amazon anymore, so those earnings are likely to be picked up by affiliates in other states. Less income tax revenue for Illinois.

    The only way something like this can work is if it is done on a countrywide basis

    Reply

  46. I grew up in IL but never knew anything about owning a business as my family worked for traditional companies.

    I moved to AZ in 1998, started my own business in 1999 when I got let go as a computer programmer, & I’m ashamed of my home state every time I hear they do things like this.

    I have no issues paying MY share of taxes. But for those in IL who have/had successful affiliate businesses, they will no longer be able to earn the income to pay taxes ON. What the heck were the politicians thinking?! I’m guessing that, as usual, they simply weren’t.

    If I were still in IL, I would be establishing my online business presence in another state under a business name & file taxes in THAT state if necessary. There would be no way in hell that I would allow a politician to take away my ability to feed my family, especially in today’s economical mess!!

    Debi

    Reply

  47. I just want to say that nowadays when we talk about affiliate marketing there are many young people who want to achieve a quick profit. This usually is not happening, they are disappointed and their efforts are thrown away in to garbage. My appeal is to target more the quality than the quantity and the results will come.

    Reply

  48. We operate an auction website that is based in Illinois, and this State has done everything possible to distroy internet businesses that are based here. We are required to collect sales tax from Illinois residents, which can sometimes cause users to go elsewhere. I hope to move out of this State soon, because it doesn’t deserve the businesses it has here.

    Steve
    Pennyprizes.com support

    Reply

  49. Wow, talk about power-mad, sad and daft politicians! Don’t these idiots realise online business is good for the economy and personal well-being? Well, yes, they probably do, but don’t care about the little guys – until it comes round to election time. Glad I don’t live in Illinois!

    Reply

  50. I had no idea that something like this was going on in our country. Governor Quinn seems to be a troubled man. He should want to lean towards the internet to create more jobs and entrepreneurial experiences for our citizens. He should not want to destroy jobs, families and life styles. Thank you for your post and please keep up the good work.

    Reply

  51. So I am obviously really late on this comment but wondering an update… I know it is still illegal to affiliate with Amazon but wondering if there is a way around it and to advertise on my site and make a profit?

    Thanks so much!
    Great article!

    Reply

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