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May 02, 2011

DSA News

The DSA: A Symbol of Strength

by Adolfo Franco

The Direct Selling Association’s incoming President, Joseph Mariano, is often fond of explaining the strength and purpose of a trade association by comparing it to fasces, the Roman symbol of strength that still adorns many of our nation’s historical monuments. The fasces, a group of simple reeds bound together, symbolize strength in unity and numbers. Individually the reeds can easily be broken—bound together as fasces they are almost indestructible.

The Direct Selling Association (DSA), like the Roman fasces, derives its power from the strength and unity of its constituent parts—in our case our member companies, executives and millions of individual direct sellers. Through the 100-year history of the Association, this unity and common purpose have allowed the direct selling industry to overcome many challenges and achieve great things. By this joint purpose—this “multiplier effect” or fasces—your Association accomplishes what no single direct selling company, however large or well known, can match in terms of force and influence.

Case in point: You’ve no doubt seen and heard the hullabaloo over the expanded 1099 reporting requirements, which were included in the Patient Protection and Affordable Care Act (PPACA) of 2010, better known as the healthcare law. These seemingly innocuous income and payment reporting provisions were included in President Barack Obama’s healthcare reform effort with little notice. When the business community was finally alerted to the paperwork and other burdens of the law, well, all “fasces” broke loose. Direct sellers were among the first to notice the new requirements and helped sound the alarm bell about the real consequences of the new obligation. You see, the burden would have affected many, but would have been doubly onerous for our industry.

Of course, direct sellers already have an income and purchase reporting requirement. Over the years we have gladly reported payments of $600 or more in compensation to our sales representatives and complied with a unique requirement to report inventory purchases of $5,000 or more on the 1099-MISC form, which is given to our sellers. The special reporting obligation was enacted back in the early 1980s as part of the special law that granted direct sellers non-employee status for federal employment tax purposes.

But the new law, slated to become effective in January 2012, would have required persons engaged in a trade or business, including direct sellers, to file a Form 1099-MISC with the IRS for all payments made to businesses totaling $600 or more for the purchase of property (goods) and services. Huh? In essence, the new law would have meant that direct selling companies and their distributors, as businesses themselves, would have had to file the forms for just about any purchase they made from almost anybody.

As ludicrous as it sounds, individual direct sellers would have been required to “issue” 1099s to direct selling companies for purchases the individual makes in excess of $600. A sales representative’s purchase of airline tickets, hotel stays, office supplies, and the like, would have required them to file a 1099 on the company providing the goods or services if the amount paid to the company totals more than $600 in a calendar year! We faced the bizarre requirement of having our companies and their salesforce members trading 1099 forms over the same transactions!

Fasces to the rescue. After helping to alert the business community to the new requirements and onerous new burdens (for direct sellers and pretty much every other small business), DSA worked to coordinate the efforts of our member companies and the 16 million voices they represent, together with much of the rest of the business community, to press for repeal.

Company executives on DSA’s Government Relations Committee sent out alerts to affiliated business groups, provided leadership to coalitions that grew to oppose the requirements, and walked the halls of Congress during our March Direct Selling Day in Washington, D.C., to urge key senators and congressmen and their staffs to support repeal. The result? After congressional action, the President signed a full repeal of the expanded 1099 reporting requirements on April 13.

There is a reason why the Roman symbol of strength and unity has resonated through the centuries. There is a reason why that very symbol now adorns the halls of Congress, where elected representatives heeded the calls of direct sellers and others to repeal a bad idea. Our industry’s continued ability to serve our communities, our customers and our country depends on this unity of spirit and action, this singularity of purpose and resolve. Indeed, united we stand, divided we fall.

Adolfo FrancoAdolfo Franco is Vice President of Global Regulatory Affairs for the Direct Selling Association.