Discussion on the Advertising Tax by industry leaders that have played a key role in organizing industry advocates and educating legislators on the impact of state tax nexus legislation. Brian Littleton, President / CEO, ShareASale.com (Twitter @Brianlittleton) (Moderator) Karen Garcia, Partner, GTO Management (Twitter @karengarcia) Beth Kirsch, Volunteer, Performance Marketing Alliance (Twitter @bethkirsch) Melanie Seery, President, Affiliate Voice (Twitter @mellies)

1. Advertising Tax Impact, Accomplishments and the Future Brian Littleton, President / CEO, ShareASale.com Karen Garcia, Partner, GTO Management Beth Kirsch, Volunteer, Performance Marketing Alliance Melanie Seery, President, Affiliate Voice

3. This is not a new tax...use tax in California alone has been a law since 1935.

4. Most people don't know it exists

5. States are looking for money

8. Affiliates - coupon sites, bloggers, search, etc. Don't think you're not included, you are.

9. Merchants - You need to talk to a lawyer about legal ramifications of keeping your affiliate programs. Some of these bills are backdated and go into effect -before- they are actually signed.

10. Networks - make a percentage of affiliate sales, essentially a commission on the original purchase.

13. Inaccuracies in the “News” “Affiliates should pay taxes too.” Fox News reporter “Why shouldn’t they pay taxes too?” CNBC reporter “It’s about time they pay taxes too.” It targets Amazon. It’s a new movement.

14. Inaccuracies in Politics “Affiliates should pay taxes too.” “I will be very surprised if any of the major click through retailers refuse to sell to our state…” Governor North Carolina Affiliates/publishers/advertisers are the same as an affiliate company. Internet sales tax levels the playing field.

15. Myths & Inaccuracies in Our Industry “This is a new tax.” Collecting tax is easy. “It’s just an advertising tax, a tax on the Internet, a tax on affiliates....” “This is a Democrat thing.” “This is a Republican thing.” Quill vs. North Dakota is a good defense argument against the tax. The tax is not constitutional. The SSTP will save the day. A defeated bill means you’re safe.

16. Most damaging Myths & Inaccuracies We can wait to act, the courts will decide. We can’t do anything once the tax is implemented. It’s not my problem. “My state would never do that.”

17. How a Bill Becomes a Law

19. Member visits/Lobbying Day in the Statehouse

20. Editorial Board

21. Letter writing

22. Group letters

23. Letters to the editor

25. State Taxpayer's Association

26. Your state website is a goldmine - many can actually RSS feed updates or allow you to sign up for bill tracking via email.

27. Networks - most now have informational pages available

30. Don't threaten to move out of state - it's an empty threat, they don't care

31. Keep your analogies as simplistic as possible

32. Don't get too technical or use acronyms - PPC, SEO, SEM mean nothing

34. Hawaii vetoed HB1405 and Amazon has reinvited affiliates there

35. Connecticut & Tennessee - postponed

36. Maryland & Minnesota - killed in committee

37. Affiliates, Merchants and Networks are more aware and are becoming proactiveTHIS IS AN ISSUE THAT WILL RETURN

38. What Now? Reaction to Nexus Law Once new nexus law is in effect, industry must continue to work together. Networks, merchants and affiliates all have a role. Action should not stop

39. What Now? Reaction to Nexus Law Role of Networks: Education and dissemination of information. Work to Identify Solutions Action Must be facilitators in recovery process. Role of Merchants: Education Communication Respect Identify Solutions – Collect tax? Rebut the presumption? Action Role of Affiliates: Preparation Education Communication Respect Identify Solutions Action

40. Solutions – What Works & What Doesn’t Retain services of in state Sales and Use Tax Attorney Understand the law (sales threshold, ability to rebut …) Examine the NY Solution – Sample documents available to rebut presumption in NY Do not use false address Do not assume incorporating in another state will work Do not follow advice of unlicensed Do not follow advice of lawyer for other party Do not try to circumvent the law, work within the law

41. Specific Steps Steps for Every Affiliate Monitor, prepare, react and adapt Steps for Every Merchant Monitor, communicate and adapt Steps for Every Network Monitor, educate, disseminate, facilitate

42. SSUTA and the SSTP SSUTA = Streamlined Sales and Use Tax Agreement SSTP = Streamlined Sales Tax Project SSTP is the organization working to implement the SSUTA Federal action

43. Streamlined Sales Tax Agreement “The result of this work is the Streamlined Sales and Use Tax Agreement. The purpose of the Agreement is to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance. The Agreement focuses on improving sales and use tax administration systems for all sellers and for all types of commerce through all of the following: State level administration of sales and use tax collections. Uniformity in the state and local tax bases. Uniformity of major tax base definitions. Central, electronic registration system for all member states. Simplification of state and local tax rates. Uniform sourcing rules for all taxable transactions. Simplified administration of exemptions. Simplified tax returns. Simplification of tax remittances. Protection of consumer privacy.” Source : http://www.streamlinedsalestax.org/oprules.html

44. Streamlined Sales Tax Project (SSTP) Full member SSTP - A full member state is a state that is in compliance with the Streamlined Sales and Use Tax Agreement through laws, rules, regulations and policies. Arkansas Indiana Iowa Kansas Kentucky Michigan Minnesota Nebraska Nevada New Jersey North Carolina North Dakota Oklahoma Rhode Island South Dakota Vermont Washington West Virginia Wyoming Source : http://www.streamlinedsalestax.org/oprules.html Associate Members SSTP - A state that is in compliance with the Streamlined Sales and Use Tax Agreement except that its laws, rules regulations and policies to bring the state into compliance are not in effect but are scheduled to take effect on or before July 1, 2009 or has achieved substantial compliance. Ohio Tennessee Utah Wisconsin

45. SSTP is Not Ideal Though simplified, compliance requires effort. The Pros & Cons One tax collection per state, states will distribute to local. Still different rates in different states. Same items must be taxable. Takes years to implement all necessary changes. May not be practical in some states. Time and difficulty. Still a challenge for small to medium size merchants. If accepted by Congress today, 23 states will require out of state merchants to collect & remit sales tax. We are not ready. Does NOT answer or solve “What is a nexus?”