MEDIA RELEASE

HONOLULU – Governor Linda Lingle vetoed HB 1405 today because this legislation has immediate and adverse consequences for residents and businesses of Hawai‘i. This legislation would place Hawai‘i companies at a competitive disadvantage. As a consequence of this bill, Hawai‘i businesses would no longer be able to receive commissions for advertisements on their website that link to numerous national and international firms that offer goods and services to Hawai‘i residents.

Already Amazon.com and Overstock.com have officially sent out notification that they are severing their “affiliate” relationships with Hawai‘i. Other well known internet-based firms, such as eBay are likely to do the same if prompt action is not taken. Hawai‘i residents can still order directly through these online retailers’ websites.

“I am vetoing this bill immediately to help ensure Hawai‘i is not economically hurt by legislation that was not well thought-out and would have negative consequences for non-profits such as the University of Hawai‘i bookstore, and businesses throughout our State,” Governor Lingle said. “I am hopeful by vetoing this bill that mainland-based companies will promptly restore their relationships with our State.”

The Attorney General found that HB 1405 HD2 SD2 CD1 may be legally defective in that it may violate Article III, Section 14 of the Hawai‘i State Constitution. This Article provides that each law shall embrace only one subject which shall be expressed in its title. The scope of HB 1405 may be broader than its title indicates and thus the legislation may not meet the constitutional test.

“We are hopeful the Legislature will recognize this legal flaw and not act to overturn my decision to veto this measure,” Governor Lingle added.

The Legislature can convene on July 15, 2009 to determine if they will sustain or override the Governor’s actions on any measures she vetoes between July 1, 2009 and July 15, 2009. On June 30, 2009 the Governor issued a list of 65 bills passed during the 2009 Legislative session that she is reviewing for potential veto action. This is one of those bills.

The Governor’s statement of objections regarding HB 1405 is attached and can also be found on the Governor’s website at: www.hawaii.gov/gov/initiatives/veto.

Baron Sekiya/Hawaii247.org

Gov. Linda Lingle submitted to the State Legislature a list of 65 bills she is considering for vetoes. Among these bills is HB1405, which prompted Amazon.com to close affiliate accounts for Hawaii residents who earned referral fees online.

The list of bills up for possible veto

See related story on Hawaii247.org here

Baron Sekiya/Hawaii247.org

Internet retail giant Amazon.com closed the associate accounts of Hawaii residents as of Tuesday, June 30, in reaction to House Bill 1405, which would collect taxes on all sales to Hawaii-based customers should the associates program continue. House Bill 1405 takes effect Wednesday, July 1.

Amazon.com has urged associates affiliated with the company, or its sister site Endless.com, to voice opposition to the legislation with Gov. Linda Lingle who has until July 15 to veto the bill.

Typically, residents with Amazon associates accounts who used banner ads on their Web sites, e-mail notices or other means of directing sales traffic to Amazon.com or Endless.com earned up to 15 percent of the sale. Amazon.com used an associate’s account identification to mark the referrals to its site and to track sales.

Amazon.com terminated associates programs June 26 in North Carolina and June 29 in Rhode Island due to similar legislation. California also is considering instituting a similar tax on out-of-state businesses.

The legislation goes beyond Amazon.com as it covers any business in another state that has 20 or more affiliates in Hawaii or if the business generates more than $100,000 through any referrals from Hawaii residents or if a single resident generates at least $10,000 in sales during the calendar year.

Without House Bill 1405 any U.S. businesses outside Hawaii without a physical presence in the state did not have to pay the general excise tax on sales. Currently, Apple has retail stores in Hawaii and charges tax to Hawaii customers who purchase goods, music and software online.

Below is the e-mail sent to Amazon.com associates:

We are writing from the Amazon Associates Program to notify you that your Associates account has been closed as of June 30, 2009. This is a direct result of the unconstitutional tax collection scheme passed by the Hawaii State Legislature with an effective date of July 1. As a result, we will no longer pay any referral fees for customers referred to Amazon.com or Endless.com after June 30.We were forced to take this unfortunate action in anticipation of actual enactment because of the uncertainty and timing of a veto, and the possibility that a veto could be overridden. The governor has until July 15 to veto the bill but, as indicated, the bill has an effective date of July 1.

Please be assured that all qualifying referral fees earned prior to June 30, 2009 will be processed and paid in full in accordance with our regular referral fee schedule. Based on your account closure date of June 30, 2009, any final payments will be paid by September 1, 2009.

In the event that Hawaii’s governor vetoes this tax collection scheme, and that veto is not overridden, or in the event the law eventually is repealed, we would certainly be happy to re-open our Associates program to Hawaii residents.

The Hawaii General Assembly’s website is http://www.capitol.hawaii.gov/, the governor’s website is http://hawaii.gov/gov and additional information may be obtained from the Performance Marketing Alliance athttp://www.performancemarketingalliance.com/.

We have enjoyed working with you and other Hawaii-based participants in the Amazon Associates Program, and wish you all the best in your future.
Best Regards,

The Amazon Associates Team