Performance Marketing Association Vehemently Opposes Proposed Massachusetts "Tax Scheme"; Urges Joint Committee on Revenue to Vote Against H01731/S01450

BOSTON, April 6, 2011 /PRNewswire/ -- The Performance Marketing Association (PMA), a not-for-profit trade association representing 5,300 Internet advertising businesses in Massachusetts and over 200,000 nationwide, today reiterated its vehement opposition to the "affiliate nexus tax scheme" contained in House bill 01731 and Senate bill 01450.  The PMA and several Massachusetts-based Internet advertising businesses will express their concern about the destructive effect the bills will have on their businesses at the Joint Committee on Revenue hearing in the Massachusetts State House on Thursday, April 7.

Today, there are over 5,300 Internet advertising businesses based in Massachusetts.  These advertising businesses earned $366 million from advertising in 2009, the latest year for which data are available.  In turn, they paid $19 million in state income tax and contributed millions back into the Massachusetts economy, including employment and business taxes and fees, property taxes and sales taxes.

"The 'affiliate nexus tax scheme' contained in H01731/S01450 will not only result in $0 of new sales taxes collected, it will devastate a vibrant and growing small business segment in Massachusetts," said Rebecca Madigan, Executive Director of Performance Marketing Association.  "These bills discriminate against independent small businesses and entrepreneurs that use an advertising model -- not a sales model -- to generate their income.  They state that if an out-of-state retailer places ads on websites owned by Massachusetts citizens, those retailers have 'nexus' and must collect sales tax from purchases made by state residents.  

"However, these bills are fatally flawed," continued Ms. Madigan.  "Most notably, they ignore the fact that the U.S. Supreme Court has repeatedly made clear that, under the Commerce Clause of the U.S. Constitution, a state may require a retailer to collect tax on sales into the state only if the retailer has a physical presence in the state.  As such, out-of-state retailers will simply stop advertising on Massachusetts websites and, instead, will advertise on competitors' sites in other states.  And, when that happens, the impact on these 5,300 small businesses will be devastating: they likely will see a 25%-35% loss of income, which translates into layoffs, unemployment, and businesses moving out of state.  

"We know this for a fact because it's exactly what happened when similar laws passed in New York, North Carolina, Rhode Island and Illinois.  The ultimate result will be no new sales tax revenue for Massachusetts, and severe damage to thousands of businesses that rely and prosper on advertising revenue.  More than 15 fifteen states have said 'no' to similar nexus tax schemes – they just don't work," concluded Ms. Madigan.

About the PMA

The Performance Marketing Association (PMA) is a not-for-profit trade association founded in 2008 to connect, inform and advocate on behalf of performance marketing, a multi-billion-dollar marketing channel that which comprises more than 200,000 businesses and individuals.  Continued growth of the performance marketing space is expected as advertisers, facing small budgets and big expectations, increasingly look to performance-based marketing initiatives to expand their business.  Additional information is available at: www.performancemarketingassociation.com.

Contact:

Lisa Picarille
Industry Advocate
Performance Marketing Association
Tel: 415-642-1863

SOURCE Performance Marketing Association