If you were on Facebook last week, you had to have seen all of the red equal signs as your friends’ profile pictures as a sign of support for same sex marriage. From what I can tell, it started as part of the Human Rights Campaign‘s effort to increase awareness and show support for marriage equality.

First I saw the equal signs. Then they started to change color. Then came the rings which seemed creative until I saw the cakes and Rothkos. (If this has helped to increase appreciation for modern art, that would be great.) Hearts started to show up along with animals. Of course there were the cats, and more cats. But then the dogs started coming and as I looked around, there were some other animals as well. Characters began to appear. Star Wars, Star Trek and Sesame Street seem to be favorites. Video game characters would not be left behind and several appeared animated. Superheroes, well my friends who know me well know that once I saw a Wonder Woman equal sign, I was hooked. And with the unicorns (the running joke in my house is that when asked what I would do if I had the last living unicorn, my answer without pause was “Eat it”) I had to see what else there was.

There were maps, flags and religious symbols. The last flag I found was the most satisfying as it integrated the equal sign into the flag. I had been wondering why no one had done that. It seems that the season is important to the development of memes like this as there was a lot matzah for Passover and Easter brought us bunnies, eggs, peeps and the like.

The last I found were the personalized images. I finally gave up gathering those as there was little diversity among the ones I uncovered last. My favorite was the one with the iPhone as it almost captures the meme of Congressional photos that will force someone to resign. While I would have expected to see Hilary Clinton in one, John Boehner was hilarious and the one that incorporated the 9 Supreme Court justices was creative. John Cusack switching from Peter Gabriel to an equal sign was good as was the planting of the equal sign on the moon.

Below you will find what may be the most comprehensive collection of equal signs from last week. I don’t want to debate the issues so please don’t comment on them. I will admit that one of the images was created as an anti-abortion icon and the artist did not want it to be included as a pro-marriage equality icon. Screw it… I did. I’m also not sure if the guns are for or against as freedom to bear any arms tends to be popular in the same states that are overwhelmingly opposed to same sex marriage.  Back to my point, I gathered these images as I am intrigued by the iconography surrounding this issue. It spread quickly, broadly and, most of all, creatively. I haven’t counted but I think there are approximately 400 images here.

There was one thing missing: a QR Code. Regular readers will note that I love QR codes and wish they would take off. So, I created one for the HRC:

Oh, for the faint of heart, stop before the end which is where the NSFW images are. If you were wondering if there were any with penises, remember that this is the internet.

Note that some (e.g. one of the Pongs) are animated but WordPress doesn’t want to display that. Consider them appropriately Easter Eggs for you to find and click through.

If you’ve seen more, please add them in the comments. If you want to debate the issues, please return to Facebook and talk amongst your friends.

Enjoy!

… or is it MySpace?

There is outrage across the blogosphere about Google’s decision to delete Google Plus accounts created by businesses and not individuals. Google doesn’t want business on Google+… yet. Google announced that businesses could sign up by July 15th to be part of a beta program and when tens of thousands of businesses and non-profits applied, cancelled the test. Um, who is surprised that tens of thousands applied to a little known Google program? If the barriers were removed, it would be millions by the end of the month. This is Google we are talking about!

A post from Christian Oestlien The Google+ Project | Ads Guy on Google+ states:

A few weeks ago we mentioned we would be doing a test of business profiles and asked people interested to apply. Believe it or not we actually had tens of thousands of businesses, charities, and other organizations apply to take part from all over the world. Many of you have reached out to me personally through Google+, e-mail, chat, and even other Googlers. Thank you. Your response has been humbling.

With so many qualified candidates expressing intense interest in business profiles, we’ve been thinking hard about how to handle this process. Your enthusiasm obligates us to do more to get businesses involved in Google+ in the right way, and we have to do it faster. As a result, we have refocused a few priorities and we expect to have an initial version of businesses profiles up and running for EVERYONE in the next few months. There may be a tiny handful business profiles that will remain in the meantime solely for the purpose of testing how businesses interact with consumers.

In the meantime, we ask you not to create a business profile using regular profiles on Google+. The platform at the moment is not built for the business use case, and we want to help you build long-term relationships with your customers. Doing it right is worth the wait. We will continue to disable business profiles using regular profiles. We recommend you find a real person who is willing to represent your organization on Google+ using a real profile as him-or-herself.

It appears that Google wants to offer special pages for businesses to use and either didn’t realize that businessses would want to use Google+ or didn’t have time to build the pages. In another post, Christian writes:

We have been watching Google+ take shape over the last week and we’ve seen some really great companies get involved. But frankly we know our product as it stands is not optimally suited to their needs. In fact, it was kind of an awkward moment for us when we asked Ford for his (or was it her?) gender!

That’s just silly. Christian continues:

How users communicate with each other is different from how they communicate with brands, and we want to create an optimal experience for both. We have a great team of engineers actively building an amazing Google+ experience for businesses, and we will have something to show the world later this year.

Looking at the Facebook and Twitter icons on every website, store front, catalog and piece of marketing material, it is hard to imagine that Google would consider launching its third(?) foray into social networking and not be prepared. Facebook has had huge success with the variety of brand pages it offers. I find it hard to believe that Google’s team built Google+ without looking at what worked and did not with other social networks. I would guess that every product manager, designer and coder on the Google+ team has a Facebook account and has for several years.

The beginning of the end for MySpace

I am more shocked that no one is talking about the best example of cutting off businesses from a social next: MySpace. Several years ago, businesses jumped on the social networking bandwagon and set up MySpace pages. I know that my company did. We had 5,000+ followers when suddenly, our account was blocked. It wasn’t deleted. We were unable to login and the custom design we had was removed and a basic template with a silly test profile pic remained in its place. MySpace refused to answer or help.

We all saw how well this played out for MySpace. Google has several high-profile flame outs in social media. If it follows MySpace’s lead with businesses, Google+ might just follow MySpace into history.

A simple solution

Let businesses sign up for accounts now. Knowing the limitation, be prepared to have these accounts migrated to the proper type of account when the new account types are ready. Unfortunately, Google isn’t building a migration tool.

Of course, there is outrage at just about every change on the Internet and it becomes the virtual equivalent of fish and chip paper. Do you really care today that Facebook changed your News Feed a few months ago? Was that when they… never mind, I can’t remember.

Try to load Twitter’s website. No luck? Nope, it’s down. What happened today that was out of the ordinary?

Twitter’s first CTO, Greg Pass, resigned today. I don’t think that he planted a daemon to bring down the site on news of his departure so we can rule that out.

The other big news is that Mr. AplusK himself, Ashton Kutcher, launched a desktop Twitter app called A.Plus. He is working with idealab backed startup UberSocial. I tried it out and it looks like a Kutcher-skinned version of UberSocial for Twitter. It is a great way for UberSocial to grab users.

While I was using it, it seemed to be making a lot of calls to Twitter. Everytime someone I follow tweeted, I got a little warning in the bottom right of my screen. I found it annoying so I turned it off. I’ve read some rave reviews (in tweets, of course) but I didn’t really like it. It was clunky. I found it difficult to scroll in the 3 different windows (more due to a lag in the speed of scrolling than anything else).

I doubt that enough of Ashton’s almost 10 million followers downloaded it and kept it open for long enough to bring down Twitter but you never know…

Yesterday Governor Pat Quinn of Illinois signed HB 3659 into law. There is plenty of background on the so-called Advertising Tax / Affiliate Tax / Amazon Tax / whatever you call it so I will give some basics and then move on to a view of solutions that might work.

The Basics

Consumers are required to pay sales tax regardless of whether or not a retailer collects it. Retailers who do not have nexus, a physical presence in a state, are not required to collect sales tax, leaving the burden on the taxpayer. Most individuals do not pay the sales tax (also known as use tax when not collected by the retailer). In an effort to collect this tax, some states have passed laws that make an affiliate relationship the equivalent of nexus for retailers.

There are two main problems with these laws:

1. These laws may not be legal. In 1992, before eCommerce began, the US Supreme Court ruled in Quill v. North Dakota that only the federal government had the right to pass laws related to interstate commerce.

2. These laws may decrease, not increase, revenue for states enacting them. When out-of-state retailers such as Amazon and Overstock.com terminate their relationships with affiliates, these affiliates will lose revenue, be less competitive with other affiliates and, in some cases, flee the state. This results in lower income tax and sales tax and higher unemployment payments.

Where are the relationships?

While I am extremely biased on this issue, I like to take a non-biased approach. I have been looking for a solution that works for both sides and doesn’t wind up having the states spend a lot of money fighting this in court.

The only perfect solution would be for Congress to enact a law requiring the collection of sales tax for the entire country. That levels the playing field in the US and, unlike in affiliate marketing where foreign companies can step in with a new-found advantage, foreign companies are less competitive due to shipping costs so they can’t take advantage over companies within the jurisdiction of the new law. But Congress won’t pass a law that will feel like a new tax to consumers/voters and where someone else (i.e. state legislators) get to spend the money.

The state of Illinois does not have a relationship with Amazon. It has a relationship with FatWallet which has a relationship with Amazon but that is not enough to create nexus. Better yet, the state of Illinois has a relationship with its residents. Residents are two things in this relationship: Shoppers and taxpayers.

In fact, it is the resident, not the store, who has the requirement to pay sales and use tax. Stores are the conduit to the collection of the tax similar to employers for income and employment taxes. You may be wondering why employers have to collect taxes and remit them to the government but stores don’t have to. Simple: It is a federal mandate. Plus, an employee establishes nexus for their employer in a state while a shopper does not create nexus for a store. Were Congress to define a shopper as establishing nexus, this would all be over.

Who do states have authority over? Taxpayers!

States can mandate what taxpayers need to do, say when they file their annual tax returns. States also have agencies that license accountants and enrolled agents, the only people licensed to prepare tax returns.

Think about how the Feds finally got Al Capone… that’s right, it was for tax evasion! There is your answer: Tax returns.

The Illinois Department of Revenue figured that out and added line 22 to the form IL-1040 for 2010. It is a required field for “Use tax on internet, mail order, or other out-of-state purchases.” Your next question should be how effective has collection been? You might assume that it wasn’t effective and that’s the reason for HB 3659. The only problem is that very few individuals have filed the IL-1040 with this new line. Believe it or not, with all of the yelling and screaming going on the Illinois legislature, there has never before been a line on the IL-1040 for individuals to pay their use tax. I did some digging and there has been form ST-44 for payment of use tax but it was not referenced in the 2009 IL-1040 instructions.

It seems to me that the best course of action for Illinois to take (or any state for that matter) is to let line 22 take effect and roll out an education program to inform taxpayers about this requirement. In addition, leveling fines for non-compliance would work as well. [Disclaimer: I report my online purchases on my California form 540.]

What about tax preparers?

When a tax professional, whether a CPA or an enrolled agent, prepares a tax return, they are required to sign it. They state that to the best of their knowledge, the return is correct.

Illinois has a use tax worksheet as part of the IL-1040 instructions. Why not make it a form that gets included with the return? Better yet, if this is such an important issue, require that both taxpayers and tax preparers must sign it. Again, educate taxpayers that they must pay use tax.

Plus, every state has a department that certifies CPAs. In Illinois it is the Department of Financial & Professional Regulation. As part of continuing professional education, the state could require training regarding use tax. I don’t know how it would be more than 10 or 15 minutes but it sure would get the point across.

Tax software can help

Intuit and other makers of tax software like to maintain good relations with the various makers of tax forms (e.g. Illinois Department of Revenue). The states can ask Intuit to have a question posed to taxpayers and tax professionals before a return can be printed or filed electronically: Did you pay your use tax? Of course, it could also be a required field that doesn’t have an override.

Some states may also be able to require this. While the Federal government cannot copyright documents that it produces (they belong to us, the people), most states can. If the tax software companies want to use these forms, they will have to agree to certain terms.

An alternative solution

When I met with state legislators and their staffs in Sacramento and their home offices in Los Angeles, I was surprised that they always asked me for an alternative solution to raising the money if they didn’t pass this bill in California. It baffled me why I should be required to have one. This is a bad bill. To me, it would be akin to my proposing to close all of the prisons in the state to save billions of dollars annualy. No one would do that because there are negative repercussions to it. Well, killing small businesses is bad in my book.

I finally have a solution: The states have legal relationships that they should work with to collect use tax. Stop trying to improperly use affiliate relationships to (quite possibly illegally) establish nexus. The best part for lawmakers is that under my plan, they don’t need to take sides between small businesses (e.g. affiliates) and the big box retailers (who donate millions to politicians campaigns).

As for Illinois, HB 3659 doesn’t go into effect until July 1. There is still time to put it on hold and give line 22 a chance to work.

In case you missed it, today’s viral marketing is courtesy of Tipp-Ex, a German maker of white out. While I am not planning on buying white out to use on my computer screen (apologies to blondes who have suffered though all of those jokes), this is better than Burger King’s Subservient Chicken. While this is interactive, it is not as customized as the Old Spice campaign from earlier this summer.

This is a great little hack. Note that the numbers on the page don’t increase with views. Animal rights activists will be pleased to note that the bear usually wins.

It is still summer vacation so my daughter and had fun finding words to type in. some are hilarious. There are also two or three for words that don’t work. We couldn’t find a comprehensive list anywhere online so we made our own.

Enjoy! Here’s what we found:
moons
shoots
feeds
walks
plays with
farts at (full credit to my daughter for this one!)
pee (yes, again evil genius daughter)
watches TV with
whites out
loves
hugs
showers
shakes
jumps
calls
photographs
dances with
sings to
eats
smokes
rides
fishes with
paints
attacks
high fives
drinks with
tickles
sleeps
moonwalks with
gives birth to
does nothing to

Watch it here. If you find more, please leave them in the comments.

I’m learning how to let go of things that I used to cherish. I loved working at GoTo.com back in the day. We knew that we were changing the world. Times have changed.

Yahoo sent an e-mail (below) out today announcing that it will be transitioning all Yahoo Sponsored Search (GoTo/Overture) advertisers to Microsoft’s adCenter. No surprise there.

Who paid for Microsoft to take over Overture?

This is the twisted part. Google paid for Microsoft’s ultimate acquisition of Overture. Well, Google and Yahoo’s shareholders.

Yahoo acquired Overture for $1.6 billion. Microsoft launched adCenter and dumped Yahoo for paid search. Yahoo settled with Google and received 2.7 million shares of Google stock. If Yahoo still holds those shares, they would be worth $1.3 billion. Now Yahoo shuts down its search engine(s) and gives them to Microsoft/Bing on an aluminum platter (I don’t think there are any precious metals left at the Yahooplex).

Between the extra $300 million, the amount that Yahoo didn’t get from probably selling the Google shares, the amount that Yahoo spent acquiring other search engines and technologies and on building its own, search was an expensive loss for Yahoo which many people wrongly considered for years before Yahoo had a search engine.

And then there were two…

Dear Advertiser,

As we shared in February, Yahoo! and Microsoft have formed a search alliance that will enable you to reach more customers with less time and effort. With the convenience of one account, you can access up to 154 million searchers, and approximately 62% more search volume than on Yahoo! alone¹.

To take advantage of these benefits, all Yahoo! Search Marketing advertisers will transition to the Microsoft Advertising adCenter platform.

Transition Timing
Our priority is to make this transition as smooth as possible for you. Here’s how we’re planning to do that:

• Protect the holiday period – We know how important the holiday selling season is to many of our advertisers. That’s why our aim is to complete this transition in the U.S. and Canada before the start of the 2010 holiday season.

• Ensure a quality transition – If at any time we feel we cannot transition with quality while protecting the holiday period, we will defer the transition until after the holidays. Should this happen, we will keep you updated.

• Provide a window of time – To give you as much flexibility as possible, we plan to provide you with a several week window, beginning in late summer, within which to initiate and complete your transition.

Transition Experience
Over the last several months, we’ve been working very closely with Microsoft to design a high quality transition experience for you. Here’s an overview of what you can expect:

• Regular communication – This email kicks off a series of communications designed to help you learn about the transition. Upcoming communications will also help you get to know adCenter, the search advertising platform you’ll use to reach potential customers across the Yahoo! and Microsoft networks after the transition.

• Transition tools – To help guide you through the step-by-step process of moving your campaigns to adCenter, we’ll provide you with transition tools within your Yahoo! Search Marketing account.

Next Steps and Resources
For now, the two most important things you can do are to manage your Yahoo! Search Marketing campaigns as usual, and keep your eye out for transition-related communications. You have a number of resources available to help you stay on top of the information:

• YSM Blog – The Yahoo! Search Marketing blog will post regularly about the transition.

• Transition Center – The Yahoo! Transition Center includes articles, downloadable materials, and, coming soon, videos and tutorials about the transition and adCenter

• Emails – We’ll send you regular updates via email, so you won’t miss a thing.

• Survey – Next month, you may be asked to participate in a survey about the Yahoo! and Microsoft Search Alliance. Your feedback is important and we strongly encourage you to participate.

We are committed to making this transition as seamless and beneficial for you as possible. We appreciate your business, and look forward to bringing you the benefits of the Yahoo! and Microsoft Search Alliance.

Sincerely,

Your Partners at Yahoo!

I am a fan and detractor of Twitter both at the same time. Remember, I’m a centrist so I can do that.

Twitter won?

Did Twitter win microblogging? Hello no. Twitter won just like MySpace won social networking… just like Yahoo, Lycos, Excite, Infoseek and Altavista were the winners who were fighting for search marketshare and AOL as an ISP. Twitter has first mover advantage and huge barriers to entry with its name on TV and every catalog in America. But it can still lose. MySpace is rarely spoken of in social networking outside of music. Yahoo is shutting down its search engine this summer (and wasn’t a search engine at all in 1999 when I joined GoTo.com) and taking the remains of Altavista with it. How many people reading this even remember Lycos, Excite and Infoseek? And AOL… don’t get me started.

Twitter apps

I’ve been known to criticize Twitter (and offer suggestions for improvement) for its lack of innovation. Twitter is a company that has trouble keeping its website up. Innovation on its website has been finally adding a Retweet system that many people don’t use in place of the user-initiated convention of the RT. There is a Twitter-made app for the Blackberry but not the iPhone or Android.

In flies Tweetie

The big news yesterday was that Twitter bought Tweetie, a company of two employees (well, an owner and one employee). One of the strangest things about this was that Twitter announced its acquisition at 6:15pm on a Friday. Um, if you close a deal late on Friday don’t you wait until Monday to announce it? Or was @Ev trying to hide it with the trash?

Why has Twitter been unable or unwilling to offer apps for the iPhone and Android. Over $100,000,000 in the bank and Twitter bought a 2-person company to do what it couldn’t? Build often makes sense but why can’t Twitter innovate on its own platform?

Good news or bad news for app developers?

The debate raging now is whether the Tweetie acquisition is good news or bad news for app developers? I would say it is tragic for Twitter app developers but good news for developers with anything that is outside of the evolutionary path of any companies that have closed platforms.

A few years ago I built statustalker with Craig Ogg and Keith Bussell. It was a Facebook app to allow people to comment on their friends’ statuses. Crazy, huh? The biggest flaw was that it couldn’t be inline with the status. Most people thought it was silly to comment on other people’s statuses at first. The other big problem was that Facebook could (and we figured would) steal it. It was a logical and necessary step in Facebook’s evolution. Now can you imagine Facebook without the ability to comment on your friends’ statuses?

Think about all of the Twitter apps like Twidroid (the one I use on Android), Seemic, etc. Dead. How about Twitpic and the other apps/sites for uploading pics to Twitter? Dead.

If you want to create Twitter app, make sure it doesn’t rely on functionality that Twitter should have or that Twitter can easily replicate and give away for free.

Apps that work

Forgetting that Zynga was built on a complete lack of ethics and shameful monetization tactics, Farmville is a great app. I don’t mean that it is an app that I will ever have a desire to use. It is a great app because there is no reason for Facebook to try to build it itself. It is not basic social networking functionality. Worrying about competitors is much better than worrying about the owner of the platform you rely on.

Scrabble is another great app (and the only Facebook app I use) and easily protected based not just on its brand recognition but more importantly Hasbro’s trademark on the game.

A Facebook app to not build

I have another Facebook app idea and I will tell everyone outside of Facebook to avoid it: Facebook Group Reader. Facebook groups suck because there is no easy way to monitor or organize them. Plus, there is no way to do that in the API. If course, if Facebook were to open it up, I’d say any apps that achieve initial success as a Facebook group reader will find themselves replaced by the functionality native to Facebook.

Twitter 2.0?

What should you build as a Twitter app developer? That’s a great question. Is there some functionality that can be built that is somehow protectable or that can guarantee being bought by Twitter? I’d say you’re better off building iPhone, iPad and Android apps where there isn’t an owner of the platform.

I’ve been thinking about Twitter 2.0 for a few months. Can some be the Facebook of microblogging to turn Twitter into MySpace? It’s possible. Of course, if Twitter bothers to listen to @davewiner and forget about fitting into the confines of SMS, then Twitter will be an amazing platform and will protect itself from many challengers.

Of course there is always Google which could get Google Buzz right in its second try. Only time will tell.

I found it ridiculous a few months ago when Michael Jackson died and people were claiming that Twitter beat CNN. That wasn’t true. Twitter had unverified (yes, and correct) reports that Michael Jackson died before CNN and other traditional news outlets were able to verify it. That’s what they have to do.

Earthquake shakes things up

Yesterday there was a 7.2 earthquake in Mexico that we felt here in LA. It was a BIG quake and not all that far away the way these things work.

The first thing I did was check the USGS website. Then, I tweeted info along with the USGS URL. Finally, I turned on CNN to see what was going on. I knew that CNN would have more info than I had.

WRONG!

Don Lemon was on asking people to tweet what they felt to @donlemoncnn.

I continued tweeting updates from the USGS website when there were aftershocks and an unrelated quake north of Sacramento. I tweeted that to Don Lemon as well. He continued to read tweets on air about people feeling the quake in LA and their pool water moving. No news.

CNN kept cutting to a woman on a computer for info. She was using Google Earth to see the quake info and report on the aftershocks. I continued to be 5 – 10 minutes ahead of CNN in reporting this news.

How Twitter beat CNN this time

You are wondering why I think that people tweeting about the quake (there were hundreds of others within seconds of the quake) beat CNN but that wasn’t the case for Michael Jackson. Simple.

I was using the same types of websites as a source that CNN was using. CNN wasn’t verifying beyond trusting Google Earth or the USGS.

There was an opinion piece last week in the LA Times about the iPad and the effect of technology on reporting standards. We all know that newspaper and magazine print subscriptions are down and more attention is being given to the online versions. It seems that editorial standards are often significantly weaker for online media for the same publication.

CNN did the right thing verifying Michael Jackson’s death. My issue with the quake reporting is that if CNN is going to just use the same websites I am, they should be much faster in the reporting.

On a positive note for CNN: Fox News and MSNBC had no quake reporting. Of course, top marks go to KABC-TV channel 7 for the best live coverage. Of course, I would have preferred some news of what was happening in Mexico, not Los Angeles.

For several years I have assumed that the next governor of California would be a Democrat… and many more after that one. Why? Because California’s Republican Party appears to be inept (and I am not making a positive statement about the Democrats). Californians tend to be moderates: Socially liberal and fiscally conservative (except when voting on ballt propositions).

Governor Schwarzeneggar was elected in a spectacle of an election that included Gary Coleman, porn stars and who remember the other 150 candidates. There was no primary. As a sitting governor, he was able to survive the Republican primary 4 years ago. I didn’t think another moderate or Republican could make it.

Bring on Meg Whitman

What makes me think that Gov. Whitman is next? The Advertising Tax. Here’s the equation:

Citizens United v. Federal Election Commission (the Supreme Court’s decision throwing out corporate election contribution limits) = Gov. Whitman

The Coalition Against the Advertising Tax in California

It started out as AB178 when it was introduced by Assm. Nancy Skinner. I was supposed to testify against it in the Revenue & Tax Committee. The hearing was canceled because there weren’t enough votes in support of it, even though Assm. Calderon, the committee chairman, was a co-sponsor.

Next it was snuck into a trailer bill to the budget. There was no public hearing. It was passed under the cover of darkness. When daylight broke, the Governator vetoed it.

Now it’s called ABX8-8. It passed the State Senate and is in 2 committees in the State Assembly.

The important thing is that there is a strong coalition in opposition being led by the California Chamber of Commerce and the Cal Taxpayers’ Association. The list of companies opposed is incredible. I am proud to have Cashbaq on a list with Google, Yahoo, ValueClick and, oh, did I mention eBay?

What’s that got to do with Meg?

Even if the Democrats get ABX8-8 through both houses of the legislature, if Governor Schwarzeneggar follows through on his commitment after he vetoed AB178 last year, he will veto the Advertising Tax again. That means that the Democrats will have pushed through the bill again with no victory. The lingering effect will be that the tech community is terrified of having the Legislature and Governor’s mansion controlled by Democrats. The smarter position would have been, assume the governor would veto it again. Wait until Jerry Brown or another Democrat is governor and then pass this bill that will be devastating to small, entrepreneurial businesses in California while having a negative impact on the state’s finances. I mean, come on, guys!

Why opposed a bill that just hurts affiliates?

The Advertising Tax doesn’t just hurt affiliates. Our businesses definitely would be devastated if ABX8-8 becomes law. Maybe these companies are opposed to the Advertising Tax because they know that it is bad for the tech sector and bad for our state’s economy.

The current form of the bill would mean that any advertising relationship establishes nexus. If that’s the case, advertising on Google AdWords and Shopzilla’s comparison shopping engine would establish nexus. So much for the Internet, especially given Drs. Foster & Smith’s recent bombshell about nexus creating a requirement to file state corporate income tax returns.

eBay is no safe harbor

eBay is concerned that if the Advertising Tax becomes law in California it will establish nexus for (are you sitting down) every eBay seller no matter where they are based. OH – MY – GAWD!!! [Cue REM]

Money can’t buy you love but it can buy you an election

Sure there have been rich folks that have run for office and lost. I had thought Meg would join their ranks. She won’t. Meg is a shoe-in now. The Democrats have guaranteed it.

Meg has enough money to pay for TV ads months before anyone else has even declared. She’s everywhere. While she doesn’t need the money from tech companies it will help both for funding and for perception. Google supports Meg Whitman. That’s 10,000+ more votes just from employees plus any Google fans out there won’t want to see politicians needlessly hurt the company. And that’s just one tech company whose employees might fear for their livelihoods. How many votes will it take to swing a close election?

Everyone knows she was CEO of eBay (if you don’t, her commercials make it clear). Now you’ll also have eBay explaining the risk to everyone in the marketplace about how the Democrats will kill eBay.

See the snowball effect yet?

Unions don’t oppose Meg

One of the strange things about the Advertising Tax is that the biggest supporters are the trade unions. My company hasn’t suggested that the State make changes that will devastate schools and firehouses. Why are the teachers’ and firefighters’ unions insisting that state legislators attack my business? They don’t seem to understand the negative impact that this will have on the state’s finances. That would be like my insisting that fire engines carry galvanized steel pipes in place of hoses. There’d be a bad impact on the state and its residents. Personally, I’ll leave it to the firefighters to figure how to use their technology best. I ask that they do the same for my business until they understand it.

Meg isn’t letting the unions attack her. She has the money to stop them. Meg has stated that if the unions attack her, she will use millions of her own money to push a ballot initiative that will require and opt-in for unions to use members’ dues for political purposes. As it stands now, individual members may opt out. This tactic will keep the unions quiet for now but there may also be backlash. November is a long way away.

Have the Dems anointed Meg?

You decide for yourself. Do you think that a Republican had a chance? Do you think that the tech sector would have coalesced behind Meg if it weren’t for the Democrats pushing the Advertising Tax?

Suggestions for the California State Legislature to help with the budget instead of ABX8-8

I wrote down a list of alternatives in my last blog post. Please refer to that if you want positive solutions that won’t hurt the State.

It finally happened. What many of us have feared from the start. Online stores closing their affiliate programs because of the Advertising Tax (aka the Affiliate Tax, Amazon Tax and several other names). Today we received notice from a store that is completely closing its affiliate program immediately (yes, effective today) due to concerns over the Advertising Tax bills that have either been passed or are pending in several states.

California Dreamin’… er, Nightmare

California, the only state I have ever called home, is considering ABX8 8 which would change the definition of nexus to include any online store that has an affiliate earning more than $10,000 per year and is based in the state. State legislators claim that they are attempting to get out-of-state retailers, namely Amazon, to collect the sales and use tax that California residents are required to pay. Amazon and other out-of-state retailers have responded that they will terminate California affiliates if the bill passes, just as they have done in other states. Overstock terminated all of its California affiliates when a similar bill was passed last year. Governor Schwarzenegger vetoed the bill and our relationship was restored.

Legislators feel that they are being strong-armed by the retailers and they see no reason to give in to such tactics. I’ll give a reason: My livelihood. State legislators will keep drawing their salaries and their stock and bond portfolios will keep their value. One of my two biggest assets will lose significant value and my income will plummet. I am not alone. Thousands, if not tens of thousands, of other California taxpayers will suffer the same fate. And if we have to start laying off employees, we’ll really see the Trickle-Down Effect. To make matters worse, the State won’t collect any additional sales tax from Amazon, Overstock or the other large online-only retailers who will terminate their affiliate relationships with California affiliates.

Governor Bev Perdue of North Carolina said it best: North Carolina is the seventh largest state in economic terms and Amazon won’t stop selling there. She was right about an irrelevant point. Amazon terminated all of its NC affiliates and still ships to the state. NC affiliates had their businesses devastated. Oh, and Amazon doesn’t collect sales tax for North Carolina. How was this a win for Gov. Perdue’s state?!?

Unintended consequences

Today we received a termination notice from Drs. Foster & Smith. You see, the good doctors aren’t so much concerned about the collection of sales tax. They are concerned that if they have nexus in many states, they will be required to file state income tax returns in all of those states. I remember as a CPA doing tax returns for a company that had nexus in 19 states. It took a team of half a dozen of us months to get the returns done. I can see why the mere threat of having to file the returns is enough even if no income tax is due in those states that have changed the definition of nexus.

Off-shore it!

I predict that next year Affiliate Summit West will be in Vancouver and Affiliate Summit East will be in London. There won’t be a reason to have a US-based conference. There won’t be any US-based affiliates if this continues.

Performance marketing offers many different types of sites for merchants to advertise on. The value of our sites won’t go away. The value will simply be picked up by foreign entities.

The Letter from Drs. Foster & Smith

It is with great regret that we have to inform you that we are shutting down affiliate marketing at Drs. Foster and Smith effective immediately  February 22, 2010.  This closure is across the board in all states with all affiliates and is not related to you only as one of our affiliates.

We regret having to do this for a variety of reasons, not the least of which is that so many of you have done a great job for Drs. Foster and Smith and will be adversely affected by the loss of revenue from Drs. Foster and Smith sales.  Thank you for all you have done to promote our company on your web sites.  We apologize for the hardship and inconvenience that this creates for you.

The single reason for the decision at this time is the moving target of the ever-growing patchwork quilt of state legislatures that are considering nexus legislation relative to affiliate marketing and sales tax.  It has become increasingly difficult to determine who is considering such laws, where they are in the process and what the ramifications are in each state.  What affiliates may not be aware of is that such nexus situations do not only relate to sales tax collection, but potentially state income tax for a corporation as well.

We wish there was clarity on this issue from state to state and nationally, but there isn’t.  So until this matter is cleared up nationally, we are shutting down all affiliate marketing.  We apologize for any hardships this brings to you and your team.  We have greatly appreciated the work that you have done on our behalf.  The sudden nature of the move by California to reintroduce legislation late last week and to push for a quick vote, emphasized the ever-changing nature of this issue and our need to be ahead of such votes and decisions.

With our appreciation for your contribution to our company,

Sincerely,

Drs. Foster and Smith Affiliate Marketing Team

Solutions for State Legislators

I learned while speaking with California assemblymembers, senators and journalists that I am required to offer a solution when fighting bad legislation so here it is:

1. Do nothing: In business, doing nothing is often a better solution. This applies to government as well. Imagine if a state legislator proposed closing all prisons and releasing all prisoners. This would save California $10,000,000,000. I think we can all agree that doing nothing is a better solution. Of course, repealing the Three Strikes law and spending more on rehabilitation would both save the State money and better society.
2. The Federal Solution: Don’t EVER mention this to state officials. They HATE it! They have no control and they know that it will never happen. Of course, they also know that the Supreme Court ruled in Quill v. North Dakota in 1992 that legally it is the only constitutional solution but they’ll ignore that. The problem is that if Congress passes the Streamlined Sales Tax Project it will, in essence, create what feels like a new tax to voters. Even if this is the collection of an existing tax, voters won’t see it that way. To add insult to injury, Congress won’t get control of any of the money. Why would they take a risk of upsetting voters when they don’t even get to spend the money?
3. Service Tax: Why is it that we only tax sales? Our economy has become a service economy so most of what as a state produce and consume goes untaxed. While most things that the Canadian government does is a mistake, have we looked to see what would happen if we start taxing the services of lawyers , doctors, accountants, architects, engineers, etc.?

The Silver Lining

AB178, the original nexus-changing bill in California, was amended so that it didn’t include the comparison shoping engines or search engines. ABX8 8 seems to leave pay-per-click advertising in the definition of nexus. If that happens, companies will have to decide if they want to collect sales tax (and pay state income tax?) if they want to advertise in AdWords. Oh, and every eBay transaction will be subject to California nexus. This is getting interesting. Let’s just hope that our state legislators don’t kill California’s tech sector… and especially not small business here.