• by Laurie Sullivan , Staff Writer @lauriesullivan, June 21, 2011

Oliver Roup, founder and CEO at VigLink, plans to take a trip to Sacramento with others in affiliate marketing in an effort to sway California Governor Jerry Brown to nix the Internet sales tax law that passed the House and the Senate. The proposed bill, which Roup assumes sits on the governor's desk, will have grave consequences for affiliate marketers, he said.

Roup already had to move a company office to Indiana after Illinois passed a similar law. The move from Illinois to Indiana only required employees to drive 15 miles east to work, but it would become a "little tougher driving from San Francisco to Nevada," Roup said.

If the bill passes California legislation, Roup will need to move Google Venture-based VigLink offices out of state. It will affect not only VigLink -- the Performance Marketing Association estimates the bill will disrupt business for 25,000 companies.

At midnight on June 14, lawmakers sent the budget to the governor's desk, but the bill containing "a whole lot of stuff" to fix California, including the affiliate tax provision, was vetoed the following day. Since then the affiliate tax provisions were broken out into a separate Internet sales tax law, which was passed by the Senate on June 15, and now remains on the governor's desk.

Roup calls it a fight between Wal-Mart and Amazon.com, where the big-box retailer continues to squeeze out the online store by driving up its prices. "All it will do is drive jobs out of state and reduce tax revenue," he said.

Meanwhile, Wal-Mart continues to push its own affiliate network. Roup said the big-box retailers have begun to push this bill through state by state.

If the law passes, it aims to close a loophole enabling online affiliates and companies such as Amazon.com to avoid collecting sales taxes, according to Paul Sawers, which does a good job of recapping the progress.

Retailers are terminating relationships with affiliate marketers in states where the bill passes. It appears that online retailers are not against an Internet sales tax. They are not in favor of the sales tax being levied at the state level.

Does this law introduce risk for venture capitalists looking to invest in Silicon Valley startups? "If this bill had been law before Google Ventures invested in us it may have introduced unwelcome headaches," Roup said.