If you're reading this, you must know that Colorado affiliates are currently in the fight for their livelihoods.

Last night, the Colorado Senate passed HB1193, the Colorado version of the Affiliate Tax.

There were well over 100 affiliate marketers at the Capitol for the entire day yesterday (some for the entire week) talking to Senators about this bill. They'd been negotiating and working for 15 hours prior to the time the bill reached the Senate floor for discussion.

I wasn't there, so that isn't my story to tell. After the folks who were there wake up after an exhausting week, I'm sure they'll share all the details.

But let me describe what I think went on from the Colorado Government standpoint.

Why are they doing this and why do they not seem to be able to think and act reasonably and logically?

What really happened in Colorado this week?

Like many states, Colorado is in a budget crisis. In Colorado, Democrats control everything, House, Senate, and Governor (who, btw, is a lame duck).

The state needs a balanced budget and the democrats have put together a package of about 15 tax bills, each bill contributing some amount of money on paper toward a balanced budget.

The Affiliate Tax bill is "worth" $4.7MM toward that budget. Again, on paper.

This, and all the other bills, would pass no matter what. Maybe with some amendments, but they would pass. The democrats would make sure of it. A non-balanced budget is not an option.

The House

This bill started out just like the other states' Affiliate Tax bills. Standard Affiliate Tax language that would result in Amazon, Overstock, and hundreds of other merchants terminating the affiliates in that state.

However, after the largest showing of affiliates to date at any state's proceedings on similar legislation, the Reps in the House last week and earlier this week seemed to get the fact that there's nothing about an online publisher located in Colorado who has a server hosted in, say, Texas, who does nothing to directly target Colorado residents that constitutes "Physical Presence". Speaking of "constituting", this was surely starting to feel very un-Constitutional to the legislators.

They reacted by adding an amendment that essentially said that "affiliates" who promoted via electronic means only were exempt from the nexus-creating criteria in this bill. So who's left? Good question. It's people who promote in person to Coloradoans and point them to their website to shop at a merchant they have an affiliate relationship with. An example given by the bill's sponsor was a church pastor encouraging his parish to go to the website to support the church by shopping through their affiliate links.

Now, anyone who knows anything about the affiliate marketing business knows that that leaves virtually nobody who meets the nexus forming criteria. But the wording of the amendment wasn't really enough. Even though it seemed to neuter the entire bill, it still left merchants exposed to the requirements. Merchants have no way of knowing how their affiliates promote them. And one single affiliate who stands in front of a group of people and promotes their website could "establish nexus". That's still too risky.

But that amendment allowed the bill's sponsor Pommer to essentially wave off the entire affiliate marketing contingent who had showed up in force. He said that every affiliate marketer who showed up there was exempt!

Note, the amendment didn't change the expected revenue of $4.7MM. How could this possibly be? Again, having this number on paper seems to be the critical thing. Not whether they'll actually see any of that revenue. Crazy dream world.

The bill passed a voice vote on Friday night, and it passed the standing vote on Monday by one vote. 33-32. A handful of Democrats broke ranks and even one, Rep. Rice, felt strongly enough to stand up and speak against the bill's passage. He now has zero friends.

The Senate

Next stop for any bill on its way to becoming a law is the Senate. Affiliate marketers, knowing that the amendment wasn't enough, shifted attention to the Senators.

The Senators have probably rarely if ever seen such a large turnout by a group of interested parties on any given bill. This was surely a week for the history books in the State of Colorado. They couldn't help but get the message that there are a LOT of business still at risk.

But they were going to pass this bill. It was needed to balance the budget.

However, it seems that they did continue to negotiate to further appease the online-only affiliates and strengthen the amendment that exempts any affiliate who does no physical promotion in the state.

We are yet to see this amendment, but word from the people on the ground in Colorado is that it is well worded to remove the risk from the merchant advertisers. Onus is on the Department of Revenue to identify any affiliate that they are engaging in nexus-forming activity and they will apparently have 30-day notice. Further, merchants will have 30 days after being notified of this affiliate's activity to remove them from their program.

As expected, the Senate passed the bill onto Appropriations with the above amendment. The amendment hasn't made its way into the bill yet, there is apparently some process to get that added.

And it isn't over yet. It still has to get through the Governer, but nobody expects him to veto this. Especially with the amendment language added that exempts electronic-only affiliates.

What Will Merchants Do?

If the amendment bears out and all the above is true, I have a hard time seeing any merchant terminating their entire Colorado affiliate base unless (a) they are taking a strong stance to make a legal point (like Amazon probably feels they must do to support their case in New York), or (b) they are simply misinformed.

Given that the Colorado State legislature was going to pass this bill and all the other tax bills by hook or by crook, this seems as close to a win as we could possibly expect.

The incredible showing of affiliates in Colorado didn't get the bill killed, but it was changed almost to the point of killing it from our perspective. I'm not going to call it a win until it's over, but so far it is far from a failure, and folks calling it a failure on twitter and blog posts immediately after watching the hearing live on the internet last night seem to have jumped the gun.

Keep up the good fight Colorado. You guys are so awesome.

And everyone else in a state that has sales tax, pay close attention and prepare. You could be next.