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Will Proposed CA Law End AdSense?
incrediBILL




msg:3875430
 7:33 pm on Mar 20, 2009 (gmt 0)

If you haven't noticed the Front Page story, we've been discussing a new proposed CA tax that will impact affiliate income:
[webmasterworld.com...]

Someone asked an interesting question, since Google and Yahoo are in California, what are the ramifications to such programs as AdWords and AdSense, and my reply:
[webmasterworld.com...]

The conclusion I drew after reading the law is that since AdSense directly refers customers via links, as do the AdWords ads showing in the SERPs, it's therefore theoretically possible that anyone using Google as an advertising vehicle could be subject to CA tax.

If people advertising in Google are suddenly subject to collecting and paying CA tax then people will most likely stop advertising on Google.

Time to speak up to the CA assembly unless you want to find new work.

[edited by: incrediBILL at 7:36 pm (utc) on Mar. 20, 2009]

 

netmeg




msg:3875441
 8:02 pm on Mar 20, 2009 (gmt 0)

Actually, if it *did* affect Google and Yahoo programs, I would expect there would be some pretty big pressure brought to bear there. Google could end up being your BFF, Bill!

incrediBILL




msg:3875454
 8:16 pm on Mar 20, 2009 (gmt 0)

FYI, the hearing date for AB 178 has been set for April 13, 2009 so there's plenty of time to get our voices heard in this matter.

LifeinAsia




msg:3875509
 9:48 pm on Mar 20, 2009 (gmt 0)

If people advertising in Google are suddenly subject to collecting and paying CA tax then people will most likely stop advertising on Google.

I could see Google (and numerous other companies) moving out of California because of this. That $55 million in expected tax revenue from this debacle would be more than wiped out by the overall tax loss from companies (and individuals) moving out of state.

OnlyToday




msg:3875530
 10:05 pm on Mar 20, 2009 (gmt 0)

I suspect Google and their high paid lobbyists will have the loudest voice there. If Google left the state so would a lot of other high tech companies.

California State govenment may not be too bright but they're not suicidal.

incrediBILL




msg:3875574
 11:10 pm on Mar 20, 2009 (gmt 0)

California State govenment may not be too bright but they're not suicidal.

I wouldn't go that far as our last governor bought our own electricity from Enron while I was sitting in a power outage which is why I help vote him out of office.

Anyway, it'll be interesting to see if the state that practically created ecommerce has a major hand in trying to kill ecommerce.

LifeinAsia




msg:3875583
 11:33 pm on Mar 20, 2009 (gmt 0)

California State govenment may not be too bright but they're not suicidal.

Not so sure about not being suicidal. Many of the current batch that supported the huge recent tax increases (and supporting additional taxes) may have made themselves unre-electable. (And that's assuming they don't get recalled before the end of their current terms.)

Unfortunately, most politicians these days seem to focus on quick fixes without considering the long-term effects.

icedowl




msg:3875588
 11:42 pm on Mar 20, 2009 (gmt 0)

We would welcome Google over here in Nevada with open arms. Especially in Northern Nevada.

purplecape




msg:3876151
 12:06 am on Mar 22, 2009 (gmt 0)

So California taxes advertising? I don't understand how this proposed law would apply.

jmccormac




msg:3876192
 2:14 am on Mar 22, 2009 (gmt 0)

It puts the Google Ireland move for EU publishers into perspective.

Regards...jmcc

Reno_Chris




msg:3876206
 4:17 am on Mar 22, 2009 (gmt 0)

There is a reason lots of businesses move from Taxifornia to Nevada, Arizona, etc.

farmboy




msg:3876212
 4:54 am on Mar 22, 2009 (gmt 0)

So California taxes advertising? I don't understand how this proposed law would apply.

I agree with purplecape. Unless California requires a sales tax to be paid on advertising services, this is not relevant to AdSense.

If California does tax advertising, then it is relevant.

And if it is relevant, I can't help but see this as a case of people getting upset now that their own ox is being gored. Where were they when others were the target?

Politicians say "tax the rich more" and the minions cheer.

Politicians say "tax the oil companies more" and the minions cheer.

Politicians say "tax this business and that business more" and the minions cheer.

Then the politicians come to pick the pockets of the minions - and the minions aren't so happy anymore.

FarmBoy

Lame_Wolf




msg:3876232
 7:01 am on Mar 22, 2009 (gmt 0)

Well said FarmBoy.

Scurramunga




msg:3876290
 9:55 am on Mar 22, 2009 (gmt 0)

California State govenment may not be too bright but they're not suicidal.

A famous governor of CA once said: "don't be economic girly-men"
;-)

koan




msg:3876292
 10:11 am on Mar 22, 2009 (gmt 0)

Politicians say "tax the rich more" and the minions cheer.

There's a difference between a millionaire having to settle with 8 cars instead of 10 and your average joe who has to ditch the car completely and take the bus. Some can bare the brunt of a tax increase more than others.

sonjay




msg:3876355
 2:26 pm on Mar 22, 2009 (gmt 0)

Unless California requires a sales tax to be paid on advertising services, this is not relevant to AdSense.

This bill isn't about taxing advertising services. What this bill does is (possibly) create a nexus in California for merchants who use AdWords to advertise.

The bill creates a nexus in CA for
Any retailer entering into an agreement with a resident of
this state under which the resident, for a commission or other
consideration, directly or indirectly refers potential customers of
tangible personal property, whether by a link or an Internet Web site
or otherwise, to the retailer,

Google is a CA resident. A merchant in, say, Nevada (or Georgia, or Maine), enters into an agreement with Google under which Google, for a commission or other consideration, "refers potential customers" to the merchant via a link (the AdWords ad). That merchant now has a nexus in CA, and must collect and remit sales tax to CA for all sales to CA residents.

As written, the bill will only apply to merchants who sell in excess of $10,000 per year to CA residents. Nevertheless, it creates a nexus in CA and requires payment of CA sales tax by merchants who are not in CA, simply by virtue of their use of AdWords to advertise their products.

farmboy




msg:3876359
 2:31 pm on Mar 22, 2009 (gmt 0)

There's a difference between a millionaire having to settle with 8 cars instead of 10 and your average joe who has to ditch the car completely and take the bus.

So that's the definition of rich? You just made my point.

As long as the opposition to such legislation is based on the "each according to his ability" approach instead of based on principle, this type thing will continue to happen.

The principle, in my opinion, is this type legislation should fail, that government shouldn't create yet another means of taking money out of the private sector and should live within its own means.

The political class keep fueling this class envy fire and thus keep those of us non-politicians divided, which enables them to proceed with their plans.

Some can bare the brunt of a tax increase more than others.

So what exactly are you saying to the posters on this board who can "bare the brunt" better than others - that this new legislation would be OK if it only applied to them?

FarmBoy

farmboy




msg:3876362
 2:53 pm on Mar 22, 2009 (gmt 0)

This bill isn't about taxing advertising services. What this bill does is (possibly) create a nexus in California for merchants who use AdWords to advertise.

My understanding is if an Ohio merchant has an affiliate in California, that creates a nexus in California and thus the Ohio merchant must pay California tax.

Somewhere in this thread, someone made the assumption that if instead of the Ohio merchant having an affiliate in California, the Ohio merchant purchased advertising from a California company (Google), this legislation would also consider that to be establishing a nexus in California and the Ohio merchant would be subject to the California tax.

I could be wrong, but I haven't seen anything to make me believe the latter example is anything more than an assumption.

If the latter is accurate and not just an assumption, then it would seem that if the Ohio merchant bought an ink-on-paper magazine advertisement from a magazine based in California, the Ohio merchant would be subject to the California tax (provided the sales volume was reached).

And the same would be true for newspaper ads, radio ads, television ads, etc.

I stand to be proven wrong, but based on what I've read, I don't think that purchasing advertising space, from AdWords, a newspaper, a magazine, or whatever venue, is going to be considered the same as "... for a commission or other consideration ... "

FarmBoy

purplecape




msg:3876493
 6:52 pm on Mar 22, 2009 (gmt 0)

farmboy, that's what I was getting at. I think that since many of us earn income both from affiliate programs and from advertising programs such as AdSense, the distinction between them can get blurry. But with an affiliate program, we can (and do) push a particular product as hard as we want, give it as much space on our site as we want, etc. We are trying to sell it. With AdSense, we are prohibited from drawing attention to the ads, never mind trying to sell something that appears in an ad. What we are being paid for is the advertising space.

BillyS




msg:3876497
 6:57 pm on Mar 22, 2009 (gmt 0)

Does this affect movies shot in Hollywood too?

BillyS




msg:3876498
 6:57 pm on Mar 22, 2009 (gmt 0)

Does this affect movies shot in Hollywood too?

Webwork




msg:3876504
 7:05 pm on Mar 22, 2009 (gmt 0)

Emerging idiocracy.

You incorporate in "tax haven" State, in order that the corporation is "a resident" of Tax Haven, USA.

But then your run into rules/laws that favor viewing corporate "residence" as existing in at least 2 places - to deal with Tax Haven, USA's "business grab". The 2 places are 1) State of incorporation; and, 2) principal place of business, i.e., corporate HQ or manufacturing HQ, etc.

So, you have a "virtual business"? Where's that "other place"?

So you host your servers in Tax Haven, USA.

Is that enough? Don't you create your content and manage your site from TaxBurden, USA?

Alright, so now you outsource your content generation. You go even further than the USA. You outsource to Elbonia on the Asian continent.

But, who will attempt to grab and tax your revenue then? Will Elbonia make a grab? For sure.

What about a site that allows for UGC - user generated content - and monetizes that "product" - the UGC?

Well, you have users in all 50 States AND around the world.

Maybe that provides a nexus for taxation in all 50 states?

Emerging idiocracy. You can see where this is going. Patchwork legislation. First to grab, all to follow. Me, me, me too!

Emerging idiocracy. There will be pain. Probably only remedied by federal FEDERAL legislation and that will like conflict with State's rights and . . well . .

There will be pain.

signor_john




msg:3876508
 7:10 pm on Mar 22, 2009 (gmt 0)

There will be pain. Probably only remedied by federal FEDERAL legislation and that will like conflict with State's rights

We live in a global economy, and many of us earn revenue from dozens or even hundreds of countries every day. How would "federal legislation" remedy anything?

Webwork




msg:3876536
 8:00 pm on Mar 22, 2009 (gmt 0)

Federal legislation may facilitate efficient interstate commerce, though the process can be corrupted by special interest politics. Treaties may facilitate efficient international commerce, though the process can be corrupted by special interest politics.

koan




msg:3876544
 8:27 pm on Mar 22, 2009 (gmt 0)

that this new legislation would be OK if it only applied to them?

I'm not in favor of the legislation or any tax increases, I was responding to your idea in general that the great unwashed are cheering new taxes on rich people (which is not exactly true). If a government really needs justifiable resources (ex: build roads, not unnecessary programs), it is more reasonable to tax people living a life of luxury instead of people just getting by. But as a general rule, whenever possible, I agree taxes should be as low as possible, for everyone.

loner




msg:3876608
 10:17 pm on Mar 22, 2009 (gmt 0)

If Adsense is a revenue source, I say use it.

maximillianos




msg:3876658
 11:49 pm on Mar 22, 2009 (gmt 0)

I'm seeing a new business model emerging... A service that provides a code snippet to block traffic from various states.

It won't "really" block traffic of course, but that is what we will tell the state's that inquire... and they will never know... ;-)

Go60Guy




msg:3876899
 1:03 pm on Mar 23, 2009 (gmt 0)

In keeping with the possibility of some form of preemptive Federal legislation, I think a good case could be made that the proposed taxing scheme imposes an undue burden on interstate commerce in contravention of the Commerce clause in the U.S. Constitution. Actually, there's some U.S. Supreme Court case law to support such an argument which says that "to impose a collection obligation on a remote seller would impose a crushing burden that would severely restrict interstate commerce".

Certainly, the likes of Google and Yahoo would have ample resources to mount such a challenge should the proposed legislation be enacted.

bwnbwn




msg:3876938
 2:14 pm on Mar 23, 2009 (gmt 0)

I have a question as most of the Google data centers are not located in california so I would assume that if the datacenter is not in calif your not subject to the tax as the referral would be coming from lets say NC datacenter not from Calif.

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