It’s never pleasant to think about legal issues and regulations that might adversely impact your affiliate business. But it’s absolutely necessary to keep on top of such laws and proposed legislation.
There are two big legal issues that have been ongoing over the several months (and more) and affiliates need to understand how they might be affected going into 2018.
On December 14, 2018, The Federal Communications Commission voted to dismantle rules regulating the businesses that connect consumers to the internet.The agency scrapped the so-called net neutrality regulations. Those rules prohibited broadband providers from blocking websites or charging for higher-quality service or certain content. The federal government will no longer regulate high-speed internet delivery as if it were a utility, like phone service.
What This Means for Affiliates
The action reversed the FCC’s 2015 decision to have stronger oversight over broadband providers. And it grants broadband companies the power to potentially reshape Americans’ online experiences. Net Neutrality is the basic principle that prohibits internet service providers from speeding up, slowing down or blocking any content, applications or websites.
Under the new law, ISPs can now potentially slow down their competitors’ content or block political opinions that can’t afford to pay for preferential treatment. ISPs could also charge extra fees to content companies.
Critics of the law fear that Net Neutrality will not be good for small business owners, startups and entrepreneurs. These small business rely on the open internet to launch their businesses, create markets, advertise products and services, and reach customers. Net Neutrality proponents feel the need for an open internet to foster job growth, competition and innovation.
Telecom experts claim the companies could feel freer to come up with new offerings, such as faster tiers of service for online businesses willing and able to pay for it. Some of those costs could be passed onto consumers.
When it Takes Effect
It will take weeks for the repeal to go into effect, so consumers will not see any of the potential changes right away.
What You Can Do
The Performance Marketing Association crafted a letter to opposed the law and vows to fight it on behalf of online marketers that are represented by the trade group.
Online Sales Tax
For more than a decade there has been a battle over the collection of online sales tax. The crux of the issue is that states want to force online retailers to charge sales tax to consumers. The tax would apply to purchases even if the retailer is not located in that state the buyer resides.
The argument against enacting such laws are that state legislators have no standing to impose taxes on a business where there is no nexus. Currently, consumers are required to track and remit that sales tax on their own taxes. However, few do. States argue they are losing much needed revenue generated from this sale tax.
What This Means for Affiliates
For affiliates, the impact would be that retailers would rather simply shutter their affiliate programs than deal with implementing the complex tax fees and necessary tracking. That means thousands of affiliates could be cut from a program if a states passes such a law. Affiliates would then lose their own revenue or maybe even be forced to shut down their affiliate businesses. If this happened, the states would actually lose money. That’s because affiliate business would no longer be contributing to the local economy and paying their own individual business taxes.
Recently, several online retailers (Wayfair, Overstock, and Newegg) filed a petition with the U.S. Supreme Court encouraging the Court not to review an earlier ruling from the South Dakota Supreme Court. That ruling prevents the state from enforcing a law that would give states more power to tax online retailers who don’t have a physical presence in those states. In October, the state of South Dakota petitioned the U.S. Supreme Court to review the decision.
The South Dakota law would require out-of-state retailers that don’t have a physical presence in the state to collect sales tax from South Dakota customers and then remit those taxes to the state.
South Dakota’s case challenges the landmark 1992 Quill Corp. vs. North Dakota ruling. In that case, Quill, an office supplies catalog retailer, was not required to collect or remit sales tax in North Dakota because it didn’t have a physical presence there.
There is also proposed legislation that would make online sales tax a federal law. That solution is more palatable to affiliates because it would be a level playing field. A federal online sales tax would not likely have online retailers closing their affiliate programs.
What You Can Do
- Get educated on what is happening with legislation in your state. Several states already have passed such online sales tax laws.
- Join the PMA to help fight state laws and stay abreast of ongoing developments.
- Meet with your state and local government representatives and congressmen. Educated them on the negative effects such laws would have on your business.