TechHui

Hawaiʻi's Technology Community

Urgent! Help Stop HB1405 - The Bill That Will Devastate Hawaii's Online Media Industry

I hate to be dramatic but the future of Hawaii's online media industry is in jeopardy and your immediate action is needed. Bill HB1405 is a bill that could cause a huge blow to Hawaii's Online Media Industry. It will handicap Hawaii's Online Media by not allowing them to fully monetize their websites giving an advantage to international and mainland companies and professionals.

Frankly, I am very surprised that there has not been more support against this bill from Hawaii's tech community since it affect so many of us directly or indirectly. Still, I believe an intelligent social network like the TechHui.com will take action and educate themselves on the implications of HB1405.

For those of you that want to learn more about HB1405 I have created a quick FAQ.

1. What is HB1405 and how will the bill affect Hawaii's Online Media Industry?
The bill will require any online merchant (Amazon.com, Buy.com, etc) that has affiliates in Hawaii to pay Hawaii sales tax. Meaning if Amazon.com has affiliates in Hawaii they must then charge Hawaii residents 4.5% sales tax on all their purchases.

Currently Amazon.com and almost all other merchants do not charge sales tax on items sold to Hawaii residents. If this bill were to pass they would have to charge sales tax if they have affiliates. To avoid this tax many merchants such as Amazon.com will just dump all their Hawaii affiliates and advertising contracts with Hawaii residents. By doing this they won't have Hawaii affiliates and will not have to charge Hawaii state tax.

As you can see this is a not a good bill because what ends up happening is Hawaii will still not get their sales tax and on top of that they hurt Hawaii affiliates by getting them kicked off advertising network such as Amazon.com, Linkshare and Commision Junction.

Troy Fujimoto the New Media Director of the Star Bulletin website strongly agrees this is a very bad bill to Hawaii Media Industry.

2. Why this has a negative affect on Hawaii's growing online media industry.
This bill handicaps Hawaii's online media companies because they won't be able to fully monetize their websites, blogs or catalogs because they will be banned from so many advertisers. This give companies or websites from other states or countries a huge advantage over Hawaii's online media companies.

Online media is a rapidly growing industry and believe Hawaii should be a part of this growth. Especially with the downturn in tourism. This type of industry is something Hawaii should promote not try to kill off. On top of that online media is a low impact industry that for the most part brings money into the state.

3. If this bill is so bad why has this bill passed the House & Senate?
Hawaii and many other states are having budget gaps to fill and they see this as a way to collect more taxes. Unfortunately I believe Hawaii will not get the taxes they think they will get because merchants such as Amazon.com will just kick off Hawaii affiliates and not have to pay sales tax. Also there is a huge hidden cost that the House and Senate did not see which is the indirect effect of Hawaii Online Media Industry.

Again, I was very surprised that very few Hawaii online publishers know about this bill. Also, I think no one in Hawaii has really taken a leadership role in informing and uniting fellow Hawaii techies. Because of that the House & Senate did not feel any pressure to vote against this bill.

The bill has already passed the House and Senate and will go into law this summer unless Linda Lingle vetos the bill. As I write this we have only about 2 more week to act.

4. How urgent is action needed?
I met with Senator Fukunaga and a lobbyist from Amaazon.com today. They are also against this bill and feel strongly that Hawaii's online community must unite and take action in order to prevent this bill from passing. The time table is very short. We have only 2 weeks to move.

5. Ok, I understand this bill negatively affect Hawaii's online media. What can I do?
The first thing to do is to better inform yourself on the implications of the bill. Next you should contact anyone you think might be affected by this bill.

You should also send an email to Linda Lingle or even media outlets such as Honolulu Advertiser or Star Bulletin (Letters to the Editor). You can easily do this online and it only takes about 5 minutes.

Email template for email to Linda Lingle

Linda Lingle's email address: governor.lingle@hawaii.gov

Another important step is to organize so our voices can be heard. I have created a Ning page to help organize our efforts. Please join the discussion.

http://hawaiiaffiliatetax.ning.com/

I will be meeting with Linda Lingle or one of her advisers in the next 2 weeks if anyone is interested in attending please let me know.

I have dedicated a great deal of focus and energy on this issue because I feel very strongly about the negative impact this bill has on our Hawaii tech community. If you believe this is bill is not good for Hawaii then I urge you to take action.

Mahalo for your time and effort,
Dean Takamine

Feel free to contact me if you have any questions or comments.

Views: 208

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Comment by Haken Pax on June 29, 2009 at 10:58pm
Can anyone email her or just the people from within the State? I have thousands of people outside of the state who will email her if I ask.
Comment by Troy Fujimoto on June 26, 2009 at 12:32pm
Performance Marketing Alliance update for today says "Update! Governor Lingle has until 7/15 to sign HB 1405. She is announcing on June 30th if she will veto the legislation or not."
http://www.performancemarketingalliance.com/2009/06/26/legislation-updates-as-of-june-26-2009/


Send Governor Lingle, an email if you haven't already.
http://www.performancemarketingalliance.com/2009/05/05/hawaiian-affiliates-time-to-email-the-governor/
Comment by Eric Nakagawa on June 26, 2009 at 7:12am
Well, it is unconstitutional. (Taxation without representation, hell they don't technically have a presence here to benefit from services).

However, the main issue is that for all companies that have affiliates within the state all sales made to the retailer by people in the state will now be subject to sales tax IF they have affiliates within the state

Essentially they're trying to force nexus without the company truly having a business presence (sales tax being applied to all sales within the state based on the company having a physical presence).

So instead of the businesses implementing ridiculous business requirements AND collecting additional taxes upon sales within the state they will instead cut all affiliate agreements with affiliates in the state. This will then allow them to continue without the additional taxes by sales from Hawaii.

All the affiliates you are with will likely be sending you termination notices (Dean shares more above, I haven't verified). IANAL, but Affiliates outside the US may still be subject to this law. If they do enforce this upon foreign countries expect more termination letters.

The one argument though is that Hawaii can't possible keep track of all sales originating from Hawaii to businesses with affiliations within the state, more so for foreign entities. Cheaper to chop off the problem as Amazon and others have done and are doing.
Comment by Haken Pax on June 26, 2009 at 6:56am
Can someone explain this to me?

In my case, because ALL my sales are out of state and some are even in foreign countries like the UK, Australia, etc. How can the State force Amazon to pay a 4.5 sales tax on those items? Is that legal?
Comment by Dean Takamine on June 26, 2009 at 1:10am
This week Hawaii affiliates also received termination notices from Endless.com, Zappos.com and Audible.com. Add those to the long list of companies that will cancel Hawaii resident contracts.
Comment by Curtis J. Kropar on June 26, 2009 at 12:09am
Now remember gang., we are talking about the same people that have a tax on the fundraising of non profit orgs. Non profit orgs in Hawaii pay tax on money they raise through fundraising events.

Do a fundraising event to buy books to teach children how to read ? "TAX THAT !"
Do a fundraising event to buy and store food so we don't starve in the event of a disaster ? "TAX THAT !"
Do a fundraising event to help pay for a surgery of life threatening disease ? "TAX THAT !"

Do a fundraising event to help pay for gas to deliver food to seniors ? "TAX THAT !"
And the gas is already taxed too.. which the non profit cant get out of paying all of the taxes on fuel either.


I am finding it difficult to recall hearing anyone in government even mention the words "reduce waste ?" or "trim the fat" or "more efficient" ?

But we can blow 2 billion a year on the DOE and plan to blow 12 billion on a set of train tracks.

At what point are we really ready for change ?
Comment by Curtis J. Kropar on June 25, 2009 at 11:49pm
"Comment by Haken Pax
Is there nothing else we can do at this point? "


Yes.
Remember the insanity and FIRE the legislators this time you vote.
I hear (may be just a rumor) that Hawaii has the highest re-election rate of career politicians in the entire us.

What change ?
Start by making a change.
Comment by Eric Nakagawa on June 25, 2009 at 11:28pm
I am worried that a bill like this, if modified could soon affect revenue generated through third-party affiliate advertising. A shift from physical to ethereal.

We did very well with referral sales for our NYT Bestseller. And I am upset that this will go into effect and effectively kill affiliate sales.

One take away though is that all you online whaterver-you-call-yourselves should be diversified in income streams, and should have been doing so since day one. Affil made up 4-5% of our (FTW) revenue in 2008. But that 4-5% could be a startup project or spin off.

What next Hawaii? You gonna be first to tax virtual gifts and objects (this would actually be smarter and more progressive).
Comment by Haken Pax on June 25, 2009 at 11:14pm
I'm tempted to tell every single Browncoat on the planet to email Linda Lingle, but I suppose that would just make her office very angry.
Comment by Eric Nakagawa on June 25, 2009 at 10:46pm
Move. Or set up an out of state entity.

IANAL + IANACPA, but this is just ridiculous.

What next tax online-revenue in addition to payroll and personal income?

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