Why Click Through Nexus is Bad for You, Me & the Internet

If you have ever known a blogger, or even just spent much time on blogs, you have probably wondered, “Can you really make money blogging?” 

Well the answer is yes.

I tend to think that when I tell people I work, and they find out what I do, they are secretly thinking “Oh that’s cute, she has a blog!”

The reality of it is that in my second full year of blogging I was able to make significantly more than I made after many years in my good corporate career.

****Please consider signing this petition to let our leaders know that we would like them to pursue internet tax law in a way that does not hurt the livelihoods of so many****

Blogging changed my life.  When my husband and I decided to have kids, we knew that with his military career including frequent deployments, travel and other significant time demands, that my career would have to take a backseat and I was dedicated to being a stay at home mom to support and invest in him, and our children.

In the past 12 years he has been in the service we have had 10 different addresses (more if you count the shorter moves.)  I pushed aside dreams of a career and poured myself into motherhood and my hobbies.  One day though, after talking with my friend, I told my husband, “Did you know that people out there have blogs, and they MAKE MONEY doing it?”  We decided right then and there that it could be done, and I would do it.

Luckily I have the absolute world’s best husband and he said if you want to do it, then go for it, and I believe in you. He proved that both with his words and his actions.

And I did it.

Not without sacrifice… there was lots of that.  I spent the better part of the first 16 months stumbling around trying to learn everything I could and not ending up with much profit at all.  During the first year or so there was a tremendous sacrifice of time with little to no financial return.  I didn’t have “fun.”  I didn’t watch tv, hang out much with friends, or do hobbies I used to enjoy.  I sacrificed a tremendous amount of time that my husband and I used to spend together (when he was home) and I sacrificed time that I could have otherwise spent with my children in some of their most precious years.

But we were in this together and my family believed in me and eventually pennies turned to dollars, and dollars turned in to hundreds, and hundreds turned into thousands and over the course of a year those thousands formed a real income.  Eventually, my blog was paying me a REAL salary.

Blogging has meant that I can have something that is mine.  Something I created from absolutely nothing.  It has given me the ability to have a career and business despite frequent moves, and flexibility with the demands of my husband’s job.

More than that, the money I have been able to make has given us, our family, our kids, a future that we would not have dreamed of on a single income military salary.  We are able to save for their future, put away for college funds, and spend more money into our local economy supporting other small businesses like the preschool my kids attend, “ninja school” my son begged for, the ballet studio my daughter loves, swimming lessons over the summer, and bringing $30 worth of donuts from the local donut shop to my son’s kindergarten class to celebrate his birthday.  These are the type of expenses we were always very cautious about on one income, but the opportunities we love to be able to provide our kids with the financial ability to do so.

Why Blogging is so AMAZING and Why Click Through Nexus is Bad.

How many times a day are you on the internet?  How many websites do you visit a day? Do you google questions, people and places?  Do you look up your recipes on Pinterest?  Are you browsing social media while you are at the doctor’s office?

Have you been charged for that?  When you click on a delicious recipe on Pinterest and it takes you to the blog to get it, is there a pop up that demands “Pay $0.99 to get access to this awesome recipe!”

Of course not!  You get all of this amazing content for FREE. All day.  Every day.

In reality though, people like me have spent probably 5-8 hours of time creating just that one recipe post for you.

Do I take 8 hours away from my husband and kids so that I can give a complete stranger (or thousands of them) a recipe for free?

OF COURSE NOT!

That is the beauty of the internet.  I can do things I absolutely love to do, and give you all of this amazing content like recipes, DIY projects, crafts, kids ideas, or just a good read absolutely for free, because I can make money from other people.  Mainly advertisers.

There are a few different types of advertising that you will see on websites, which translates to a few different ways people like me make money without having to charge you, the reader, a penny for all of that time I spend creating.

You may see traditional ads in my sidebar, on the footer or header of my site.  You can download ad blocking software so they don’t “bother” you, or you can just realize that is one of the things paying for you to get the content for free and glaze past anything that doesn’t interest you.

Ads are great, but the way I make the biggest chunk of my salary is through something called affiliate marketing.  Really affiliate marketing is just a fancy term for a different kind of advertising.

Every time I post, whether it is on my blog, Instagram, Facebook or any other place, the project, recipe or article will talk about a product I used.  Whether it is an ingredient, or even a pan I used in a recipe, or a type of glue that worked really well for the project I was making, I am always talking about something being sold by someone just by the nature of sharing my experience.  A great example of this in action is in the post I talk about why I did the Whole30 diet, I linked to the book for those that weren’t familiar with it.

Retailers love this because when I tell my readers about something, it is because I used it, I know it, I love it and I want to share that with you.  In turn many people often want to try or buy the product for themselves.  When I am an affiliate for a company it simply means that if I link to one of their products and then someone buys it, they will pay me an advertising fee, which is usually a small to very small percentage of the sale.

Affiliate Marketing is Win-Win-Win.

You win, because you continue to get content on the internet that is completely free to you.  When my newest recipe posts there will be no fee to pay for the 8 hours of work the post took to create, you will just click and see it there.  If you happen to see something I recommend and buy it then great, I hope you love it, and if not, that is fine too!

The retailer wins because they get sales in a very genuine and authentic way.  People who like their products, telling people like them (their readers) about it.  The best way to get a customer!

I win because I am able to continue writing about the thing I love, share them with my awesome readers for free, and make a salary that can significantly contribute to my family without bothering anyone for money.

If bloggers can’t earn an income, the plethora of free content at the level of quality we have enjoyed it will surely have to disappear.  I know that I don’t work for free, so I can either charge you, or stop producing content.  If bloggers can’t make an income, then they won’t create content.  And that my friends, is bad for the internet.

The problem is TAXES.  It is always  taxes, isn’t it? {i.e. Nexus Basics}

{Disclaimer:  I am not a lawyer, nor a tax professional.  I am not a legislator and have very little real grasp on how this process all works.  Actually I am pretty bad at all of these topics, so I am going to break this down as simply as I can and explain how I see all of this just using this crazy thing called common sense.}

The current legislation that is pending that effects what I am going to discuss below in Utah is HB 0235 & SB0182.  You can click on each one to read the actual bill.

I am sure you have noticed if you have ever bought anything online, that if you buy something from an out of state seller you aren’t charged sales tax on that sale.  This is kind of awesome as a buyer, but let’s be honest, I am not buying from Amazon because they save me tax. I am buying from them because I have 3 small kids, a full time job, and Amazon is going to set that item on my doorstep in only two days or less.  I don’t even have to leave my yoga pants or tame my messy bun for one step of the whole shopping process.

By law, if a seller does not have a physical presence in the state then they are not required to pay sales tax on purchases made in that state.  Like I said, I am really no good at this stuff, but I think it goes back to the first defining days that our country was formed where it was declared that in America, there is “no taxation without representation.”  If there is no physical presence to represent that company when issues of tax are voted on then they should not have to be held subject to those laws.

As you can imagine though, as internet sales rise every year, the states feel like they are missing out on significant revenue that they could, and arguably SHOULD, be collecting.

Now if you have hung in there with me this far, this is where it gets sticky.  Because states can’t force these online sellers to pay tax without a physical presence, they are now grasping for things to force that presence so that they can try to force these companies to pay taxes.

That is where click through nexus comes in.

States are exerting that because a company has an affiliate relationship with someone, that the company now DOES HAVE a physical presence in the state and thus established Nexus, and they can force the company to remit sales tax on all sales to residents of that state.

There are a couple of points of greatly flawed logic and a lack common sense.

1. I will start with this because it is the easiest and most obvious.  In every similar precedence we have to date, when a state passes legislation forcing click through nexus as a means to force retailers to remit sales tax, every large and most every small affiliate partner will terminate contracts with their affiliate marketers (bloggers, YouTubers, Instagrammers) in the state, rather than restructure their whole program to pay tax in that state.  You can read an excellent example of this happening in real life, to real bloggers in this article that shows the letter Amazon sends to terminate affiliate contracts due to Nexus law.

To put this in the simplest terms, by passing this law, online retailers still will not pay taxes because they will terminate contracts with affiliate meaning the affiliates can now make ZERO money and the state still doesn’t bring in any additional tax revenue.

Some states such as North Carolina have even said that overall they have lost total revenue since not only did they not bring in any additional tax revenue, the affiliate contracts were terminated and that income lost by the residents of the state now no longer is fed into the economy.

Other states have said that there is actually no way to even show if the bill has worked since there is no mechanism to track the incremental tax that would supposedly be coming in.  In the business world, I am pretty sure people get fired for this kind of thing.

Large states like California and New York, have successfully passed Nexus law, but the affiliate marketers were able to continue to work with Amazon since Amazon already had a warehouse or other physical presence in the state which means that they are required to pay tax to that state regardless.

In smaller states like Utah where we currently live, legislators bring these big state cases up to try to prove that it will not effect affiliate marketers, but that is not the case.  It really is not common sense to compare New York and Utah like they are identical markets.  If you look at Arkansas, Colorado, Maine, Minnesota, Missouri, North Carolina or Rhode Island you will see that in every case affiliates received immediate notices that their contracts were terminated.

2.  As a blogger who places genuine links to retailers on a blog that could have nothing overall to do with the focus of that retailer, am I really a physical presence for a company?  Most bloggers, like me, talk about a wide variety of topics.  A blogger could be a member of a hundred affiliate programs.  Does that mean I represent 100 companies and their interest in my state just because I linked to a product from my laptop, sitting on the couch in the living room? I have no storefront actual, or virtually on my website.  Am I really establishing a physical presence for a retailer where I reside and write my blog?

3.  Another important point is that my blog is not primarily an influence on the local Utah resident.  Because the internet is what it is, I actually have a very small impact on actual residents of Utah.  To be exact, out of the past 6.5 million sessions on my blog, only 1.67% of them have been from Utah.  It seems to me in using common sense that the fact that I am sitting on my couch in Utah writing this article, does not very closely connect me to Utah at all.  And in my mind it makes sense that Utah will lose far more of my tax dollars from me not being able to create the income off of those sales in other states, than potentially gain when all affiliate relationships in Utah are terminated.

4.  The biggest thing that gets me is that our legislators, the ones we elected to represent us, are using bloggers, real life home grown small businesses that support the state and pay taxes, as pawn in a game that they know they will lose. By passing this legislation they don’t care if they wipe out the means of a person to provide for their family if they think they can stick it to the big guy.  Only, if we look at history, they can’t, and won’t, and in the end will just wipe out people like me for no reason.

We aren’t talking peanuts here, the Performance Marketing Association (PMA) which is the professional association that represents affiliate marketers has provided statistics that there are approximately 10,000 businesses using affiliate marketing in Utah.  Kind of a big deal right?

I was told by someone in government “Really, this isn’t about the bloggers.”  But still, I can’t see anything except that this is exactly what this is about.  About leveraging the relationship a blogger has as an advertiser to get online retailers to pay tax.  If only we didn’t know that that was a catastrophic failure on every front.  For the state and for the bloggers.

This isn’t taking a few percentage points of tax off of a business.  This is squashing the ability to earn affiliate income to zero.  The type of people that this effects are me, a military wife who has made a career of this I can keep to support my family as we move.  A friend who had to leave a bad marriage and is now a single mom of two.  My friend Becky who has grown her business to allow her to stay home with her kids, run a business, and employ two other moms so that they can stay at home and earn money to support their families as well.  My friend John who left the corporate world so he could create his own business and be present in raising his kids and family all while creating a website about a message he is passionate about.  Real people, who depend on this income.

LOSE-LOSE-LOSE-LOSE

The state loses.  Not only do they not gain incremental revenue from sales tax, but they lose both income tax and sales tax from purchases that would have been spent in the local economy with the disposable income bloggers no longer have.

The bloggers lose.  Bloggers are not against internet sales tax.  Bloggers are against losing their livelihood so that the state legislators can use them as a pawn in a losing game.

The retailers lose.  Big retailers like Amazon don’t want this.  They have publicly said they are not opposed to paying sales tax to states, but they would like to work with states to do it through the right channels and methodologies.  Small companies with affiliate programs lose, because they can’t afford the type of infrastructure it would take to pay the taxes that would be required so they lose their affiliates and lose sales.

YOU LOSE.  If we can’t create an income we can’t put out the content.  You won’t be able to go to my site to grab a recipe, find out what sippy cup doesn’t leak through my mom-tested experience, or get the free printable download for the teacher gift you need to make at the last minute.  You won’t be able to go to other sites that give you coupons and deals, or reviews on technology, or whatever it is you like to look for online.  Would you go to work tomorrow if no one was going to give you a paycheck to do the work?  How will bloggers cover their costs for hosting, email lists, the camera to take the pictures, the software that we create with?

Why are we discussing a losing game plan?

I don’t know.  It doesn’t seem like common sense to me, but after all, I don’t really understand how government works.  At the committee hearing they broadcasted live this week where they were voting whether to put this issue though, one of the voting committee members voting on this issue, stopped the speaker about 3/4 way through the session and asked “What exactly is affiliate marketing?”  While I admire that he wanted to understand and was willing to admit he didn’t know, does it concern anyone else that people voting on this issue don’t even go into a vote knowing the most basic facts about the issue they are voting on? An issue that impacts up to 10,000 people in the state of Utah?

It concerns me, if that is the way government is supposed to work.

I encourage you to explain to your representatives what affiliate marketing is so that they can understand.  Write them, call them, or just send them this post by email, Twitter, Facebook, or however you can!

Why is Nexus Law far worse for military family bloggers?

As if I haven’t depressed you enough, this gets worse when you are a blogger from a military family like me.

If this law gets passed in Utah I have some blogging friends that will be forced to move their families and relocate to a new state.  That really stinks.  It is sad that they have to leave their extended family and the roots they have planted. But they can weigh the cost of moving with the cost of finding a new job and make the decision best for their career and their family.

But I don’t have that option.  As a military family we are told where we will move.  And we move often.

If this bill passes and is enacted into law, I can’t just leave Utah and settle in a state with favorable nexus status.  We will have to stay here until the military tells us it is time to go. Then hope that the state we are assigned to next does not have the same legislation.  And repeat for 8 years until our career ends and we do have that freedom of choice.

I have been blogging just shy of three years.  In that three years we have lived in exactly two states and I have dealt with nexus legislation two times.

Is that fair?  Is it right?

Well, I will tell you this much.  Due to my status as a military spouse, I am by law a permanent resident of the state of Texas, yet nexus law still applies to me because it relates to your physical presence, which is currently in Utah and could change 4-8 more times over the next 8 years.

How can I as a military spouse build a business when I am yanked from state to state though a patchwork of states laws, which hasn’t been addressed by the federal government, and really maintain this as a legitimate way to build a career that allows me to earn and support my family.

We are the ripple effect.  

And not just once do we have to deal with it, the military blogger gets to relive the hardship of dealing with click through nexus legislation, over and over, many times as we move from state to state, as we serve our country and follow military orders.

What can be done?

To be honest I don’t know the best things to tell you.  I already admitted that I don’t completely understand the process of the government (and definitely don’t understand the thought behind this legislation.)  But again I am just going to use my best commonsense on what I think can help. If you have ideas, please leave them in the comments.

No matter where you are or what you do for a living, if you see how this can be harmful to the livelihood of so many, PLEASE sign this petition to show that you do not support this type of legislation.

1. The easiest thing is to hit the share button at the top or side of your screen and share this post on Facebook or Twitter to help gain exposure to this issue for bloggers and military bloggers specifically. You can tag @mikemckellutah  or @UtahReps on  Twitter or leave a note on the Utah House of Representatives Facebook page here.

Additionally, send this article to your representative by email to help educate them on what affiliate marketing is and help us together come to a BETTER solution for the citizens of the state.

2.  Contact the Utah Representative sponsoring the bill.  Tell him that Utah HB235 hurts as many as 10,000 small business and military family bloggers with precedence that shows the legislation will not work.  Ask him to reconsider the ramifications of what this legislation would mean to hard working individuals.

Utah District 66 Representative Mike McKell 

Email: mmckell@le.utah.gov

Phone: 801-210-1495

3.  If you live in Utah, PLEASE contact YOUR local representative to urge them to VOTE NO on HB0235 + SB0182.  You can find the contact information for your Utah rep here or the info for all Utah reps here.

Please know my extreme gratitude if you have made it to this point in the post.  I appreciate you being willing to hear both my story, and how this can impact bloggers, military families supported by blogging, and the internet as a whole.  I really hope our local Utah legislation can reach out and understand the ripple effect of this type of legislation and find an alternative.  I hope to be a part of that solution.

Additional Resources:

Forbes on Utah’s Internet Tax Folly

Bloomberg on Internet Tax Laws

The letter Amazon sends when states enact affiliate nexus laws