December 01, 2010
DSA Legislative Update for 2010
The past year has been a busy one on the advocacy front, with many legislative successes for direct sellers. The combined efforts of DSA members and staff have resulted in positive outcomes in many instances, with the ultimate goal of protecting direct selling companies and the independent business people they represent. Here are just a few key issues the DSA worked on in 2010.
DSA worked closely with the Nebraska Attorney General’s Office to incorporate the DSA anti-pyramid scheme language into the Attorney General’s overall legislative package to update Nebraska’s Uniform Deceptive Trade Practices Act, and on April 12, the bill was signed by the Governor, making Nebraska the seventh state to adopt the current DSA model, following South Dakota, Idaho, Utah, Washington, Georgia and Virginia.
Over the last couple years, DSA member companies and staff have traveled to Sacramento numerous times to beat back attempts to implement a 3 percent withholding tax on independent contractors. Member companies also sent numerous emails to legislators and engaged their salesforces as well. To date, we have been successful, but as the state’s budget woes continue, the possibility of independent contractor withholding remains.
In support of this effort, DSA organized a “Direct Selling Day” in Sacramento on May 4. A direct selling delegation visited every legislative office. Executives from more than 10 companies directly participated in the visits to legislative offices. The primary goal was to educate legislators on the significant contributions the direct selling industry makes to the California economy. The delegation members also emphasized the negative impact independent contractor withholding would have on direct sellers. The Direct Selling Day ended with a reception highlighting the direct selling industry through product displays, a video, gift bags and product demonstrations.
Bills were introduced in Tennessee that had very troublesome definitions that would have called into question the legitimacy of internal consumption and dramatically inhibited that way legitimate direct selling companies operate. DSA representatives were successful in securing support from legislators to block the bills, and the sponsors ultimately agreed to not move the bills forward and to consider the DSA’s model pyramid bill as a viable alternative in the future.
In Delaware, legislation was introduced that would have required all direct sellers to obtain and display a government-issued salesperson identification card and solicit sales only between the hours of 9 a.m. and 7 p.m., with fines of $75 – $250 per violation. The bill was amended to exclude all non-door-to-door direct sellers and ultimately failed to pass. We anticipate that the bill will be reintroduced in 2011.
Federal Healthcare Reform and Independent Contractor Status
DSA government-relations staff and member company executives closely tracked the development of healthcare reform legislation, reviewing many drafts and many amendments along the way to determine if and how Congress would handle insurance coverage for independent contractors. The most troubling provision requires increased 1099 reporting requirements for direct sellers and other businesses. The DSA and other business groups have strenuously called on legislators for a full repeal of this burdensome and unnecessary reporting requirement. Senate Finance Committee Chairman Max Baucus has now formally introduced a bill, the Small Business Paperwork Relief Act, which will completely eliminate the increased 1099 reporting requirement contained in the recently enacted healthcare reform law. The DSA will continue to monitor and support passage of this and any other bills that would address this issue.
Several other bills and administration proposals that could impact independent contractors, including direct sellers, have been introduced this year. These include allowing for voluntary withholding of income tax from independent contractors as well as legislation concerning the classification of workers containing onerous recordkeeping requirements.
The Obama Administration released a proposal that would have undermined independent contractor status by eliminating protections in the law that allows a taxpayer to treat a worker as a non-employee for employment tax purposes, regardless of the worker’s actual status under the common law test, unless the taxpayer has no reasonable basis for such treatment or fails to meet certain requirements. It should be noted that direct sellers are defined as statutory non-employees under another section of the law not affected by this proposal.
The DSA staff is closely monitoring these and any other independent contractor issues and meets regularly with other independent contractor stakeholders in order to form a broad-based opposition to any effort that would undermine the status of independent contractors.
The DSA plans a full program of advocacy activities for 2011 and welcomes the participation of direct selling executives in these efforts.