SACRAMENTO, Calif., June 30, 2011 /PRNewswire/ -- Knowing there were 25,000 California businesses at risk, Governor Brown still signed ABX1 28, according to the Performance Marketing Association. ABX1 28 is budget trailer legislation that attempted to get out-of-state retailers to collect California sales tax, but instead, caused immediate devastating loss of income to web-based businesses in California.
Knowing passage was imminent, out-of-state retailers began sending termination letters out to California website owners last night, letting them know their advertising agreements would be terminated upon the Governor's signature of ABX1 28.
Rebecca Madigan, Executive Director of the Performance Marketing Association, stated, "The devastation is immediate, because the law went into effect upon signing. We tried to communicate to the Governor that this bill would only lead to dramatic income loss of small businesses and job loss, and he signed the bill anyway."
Similar legislation has been proposed in numerous other states, only to be rejected because those elected officials recognized these proposals do not generate any additional sales tax revenue and, in fact, harm small businesses. When out-of state retailers stopped advertising on in-state websites, the states collect no new sales tax, and in fact lose income tax revenue. ABX1 28 is just more of the same; it will simply not address the budget deficit because out-of-state retailers are terminating their advertising relationships with 25,000 California website owners as well.
These California web-based companies earn income from ads placed on their websites. In 2010 they paid $151 million in state income taxes. The result of ABX1 28 will mean these small businesses will go out of business or move out-of-state to preserve their incomes. As a result, California's current deficit and economic outlook will get worse.
"I hope the education community in California is ready for those trigger cuts, because in January not only will income tax revenue from these small businesses be lower, the illusory 'sales tax' will not have been collected, putting California in a more precarious economic situation," Madigan concluded.
The Performance Marketing Association (PMA) is the national trade association representing affiliate marketers. The not-for-profit trade association was founded in 2008 by the leaders of the performance marketing industry. The PMA gives performance marketers a unified voice to address issues and challenges facing the industry, such as the "nexus tax" proposed in some states.
SOURCE Performance Marketing Association