New York State Sales Tax Negatively Impacts NY Affiliates
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New York State Imposes Sales Tax on Online Retailers
The law sets a June 1 deadline for out-of-state sellers to register with the state and start collecting taxes. The state is threatening that those companies that don't comply could be subject to audits and bills for back taxes.
One aspect of New York state's argument is that online retailers that utilize affiliates based in New York have a 'physical' presence in New York, therefore, should register as a business in that state and collect taxes on all purchases shipped to New York residents.
This Internet tax debate has been ongoing since the 1990's. In the 1992 U.S. Supreme Court ruling, Quill v. North Dakota, the court held that a retailer must have a "physical presence" within the state in order to be responsible for collecting sales taxes. New York State is claiming that affiliates give online retailers a "physical presence" or nexus {a means of connection; a link or tie} within the state.
New York residents are supposed to report sales tax from online purchases on their tax returns. Since the majority of people do not do this, the state is trying to tackle it from another angle and force the online retailers to collect the taxes for them.
Two Online Retailing Giants Respond:
Overstock: Drops 3,400 NY Affiliates
May 30th: Overstock.com sues New York
Amazon: States they will begin collecting taxes on June 1st as required and has filed a lawsuit against New York State. The final ruling in this lawsuit will impact the future of online selling.
Added 6/24: Cafepress drops New York affiliates.
Random Thoughts
Whose lead will other merchants take, Overstocks or Amazons?
If this law passes, how many of the remaining 49 states will follow?
How does this law affect eBay affiliate sales, or does it?
Squidoo is based in NY, what are the implications, if any?
How will New York State be able to enforce this new law?
Overview
- The Amazon Factor
- Are you a New York Affiliate?
- List of Merchants That Have Dropped NY Affiliates
- A Different Approach Merchants are Taking
- Share a Sale Affiliate Network
- Clickbank
- Commission Junction
- $10,000 Threshold
- LinkShare ~ DMA (Direct Marketing Association)
- LinkConnector
- DoubleClick Performics
- New York Affiliate Poll
- Which States May Be Next?
- Merchants Drop North Carolina Affiliates
- Stay Informed
- Tax Talk
The Amazon Factor
Amazon appears to be the target of this new law passed by New York State. So much so that many are referring to this new sales tax law as the "Amazon Tax".In its complaint against NYS, Amazon says that this law is unconstitutional because it violates:
The law's presumption is unconstitutional on its face because it forces collection on out-of-state retailers that lack in-state entities that are significantly associated with Amazon's ability to operate in New York.
The law is also effectively an irrebuttable presumption, because Amazon is forced to disprove a negative - that each and every one of its Associates aren't "soliciting business" directly or indirectly - particularly because Amazon doesn't control the timing, format and placement of Amazon's ads on its Associates websites.
Amazon vs. New York State
Amazon says it is advertising when it compensates New York-based websites for posting links that refer customers to Amazon.com.
New York says it's soliciting business.
The gloves are on. The battle has begun.
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Are you a New York Affiliate?
New York State Sales Tax Law
Tell me what you think of this new tax law!
Fetching blurbs now... please stand byIt is wrong for NYS to impose this tax
The_Idea_Gal says:
This law is a terrible imposition on the small business person. It just started in Connecticut as well and CSN (Shareasale) and Hayneedle Stores (Pepperjam) will no longer be doing biz in CT. I worry how far this will go. Just not good!
Posted May 17, 2011
katlupe says:
I think it stinks!!! NY takes so much tax from us already. I am almost ready to move.
Posted May 14, 2010
AK816 says:
This is absurd. NY just loves finding ways to nickel and dime the residents.
Posted February 03, 2009
NYS has the right to collect this tax
v.b. says:
New York should be looking out for it's revenue. Why give online retailers an 8% to 9% advantage over New York brick and mortar businesses?
Posted February 24, 2009
Merchants who no longer accept NY affiliates
*currently 56 Merchants*
ABestWeb is maintaining a list of all merchants who have dropped New York affiliates. Merchants will only be added to the list if proof is received that the merchant is terminating affiliates due to the New York State tax (a copy of the termination email is sufficient proof).
If you are a New York affiliate and you receive notification from one of your merchants that they are terminating your affiliation due to the New York State tax law, please submit this information to ABestWeb or contact me and I will forward this information for you.
List of Merchants That Have Dropped NY Affiliates
4Checks (Shareasale)
Acorn Media (Linkshare)
Amerimark (Linkshare)
Baby Universe (Linkshare)
Backcountry.com (CJ, Avantlink)
Binoculars.com (CJ)
Bodybuilding.com (CJ)
Brecks (Performics)
Cafepress (CJ)
CCVideo (Linkshare)
Checks In The Mail (CJ)
Checks Unlimited (Shareasale)
Collectors' Choice Music (Affiliate Future)
Compact Appliance (CJ)
CSN Stores (Shareasale)
Deep Discount (Affiliate Future)
DVD Planet (CJ)
Eastwood Company (CJ)
eToys (Linkshare)
Fingerhut (Linkshare)
Footsmart (CJ, Performics)
Gaiam.com (Linkshare)
Garden's Alive (Performics)
Geeks.com (CJ)
Gurneys (Performics)
Henry Fields (Performics)
Jewelry Television (CJ)
J&P Cycles (CJ)
Justflowers (CJ)
Karmaloop (Linkshare)
KB Toys (Linkshare)
LampsPlus (Linkshare)
Leaps And Bounds (Performics)
LinenSource (Linkshare)
Luggage.com (Shareasale)
Michigan Bulb (Performics)
Musicians Friend (CJ)
MyTwinn (Linkshare)
NetShops
Northern Tool (CJ)
One Step Ahead (Performics)
OnlineShoes.com (Linkshare)
Oriental Trading (Linkshare)
Overstock (Linkshare)
Palo Alto Software (Independent)
Red Envelope (Performics)
ReStock It (CJ, Shareasale)
Ritz Camera (CJ)
ShopNBC (Linkshare)
ShoppersChoice (CJ)
Silhouettes (CJ)
Spilsbury (Affiliate Future)
Spring Hill (Performics)
Thompson Cigars (Linkshare)
Tirerack (CJ)
uBid.com (CJ)
A Different Approach Merchants are Taking
Some merchants are not dropping New York affiliates, but are amending their affiliate agreements with New York affiliates based on the Rebuttal clause of the new tax law which states:"A seller may rebut the presumption that it is soliciting sales in New York State through resident representatives. For purposes of administering the new presumption, the Tax Department will deem the presumption rebutted where the seller is able to establish that the only activity of its resident representatives in New York State on behalf of the seller is a link provided on the representatives' Web sites to the seller's Web site and none of the resident representatives engage in any solicitation activity in the state targeted at potential New York State customers on behalf of the seller."
Here is an example of the clause some Merchants are adding to their affiliate agreement:
"4.4. If Merchant is based in New York State or has office(s) located within New York State, Partner will only allow Merchant to promote Partner brand(s) and/or web site(s) via Partner's web site. Partner may not promote Merchant through any other marketing channel including, but not limited to: paid search marketing, e-mail marketing, lead generation, mobile marketing or telemarketing."
Recent News on the New York State Tax Law
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- State Street
- If the bill becomes law, while Amazon may still succeed in pushing back collection of the tax, smaller affiliates may not be so fortunate, according to Matthew Cheng, president and founder of West New York-based eCoupons Inc., a company that has ...
- S&P Capital IQ Picks CLF Focus Stock of the Week
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Share a Sale Affiliate Network
I am a member of ShareASale and also a New York affiliate. I am pleased with the proactive stance they are taking on this issue. They are working closely with their merchants and providing them with as much information as they can so that they will be able to make an educated decision regarding their NY affiliates. At the same time, they are keeping their affiliates updated via forum postings and blog posts.
Kudos to Brian for a job well done. Your affiliates appreciate your efforts.
Brian makes a good case for Merchants to not drop NY affiliates. With the Amazon lawsuit, two outcomes are possible.
1. NYS will win the lawsuit and other states will quickly jump on the bandwagon. So if merchants drop NY affiliates instead of implementing the technology and infrastructure needed to collect tax, they will be at a competitive disadvantage to those merchants who do set up this infrastructure. When other states follow suit, they will have to start building or drop all the affiliates from these states as well.
2. The courts will rule in favor of Amazon. If this should happen, merchants who have already eliminated all NY affiliates, will have a hard time getting those relationships back.
Read full blog post here
Should Merchants be required to collect this tax?
The court ruling in the Amazon vs. New York State lawsuit will have a significant impact on the future of Online Selling & Affiliate Marketing
Fed up with being overtaxed in NY State?
Clickbank
"While we are disappointed by New York's decision, there is no way we are going to cut off our affiliates, our highly-valued business partners, because of an action by lawmakers."Read full blog post
Commission Junction
Commission Junction sent out a no-stance email to all of it's New York affiliates. It appears that they are going to let this play out instead of doing what they should be doing and getting involved.snippet of email I received:
"As you may already know, the State of New York recently enacted new legislation that addresses tax registration, collection, and other time-sensitive obligations. As with all laws, this law may or may not apply to you and your business. We are actively monitoring the law and will use reasonable efforts to protect ourselves and our publishers as we deem appropriate."
$10,000 Threshold
The cumulative gross receipts to New York Residents has to be above $10,000 during the preceding four quarterly sales tax periods.
If an online retailer did not make at least $10,000 in gross sales to New York residents, they are not obligated to collect sales tax.
New York State is targetting the larger online retailers with this new tax law.
LinkShare ~ DMA (Direct Marketing Association)
LinkShare and DMA held a conference call May 22nd. feedback on this conference callFrom LinkShare:
"We have been actively working with, and providing support to, the Direct Marketing Association (DMA) to clarify this law. The Direct Marketing Association is the leading global trade association for businesses that use direct marketing tools and techniques. LinkShare is proud to be their partner. As this issue continues to develop, we are committed to making available the insights of authoritative partners like the DMA to help inform and guide you."
DMA's Interpretation of New York states tax law
LinkConnector
LinkConnector sent out a message to their merchants with recommendations on how to handle the New York State tax law. Here are some of highlights of the message sent:Read the full article
DoubleClick Performics
All data needed to evaluate your New York based affiliate relationships is available in ConnectCommerce at anytime. Advertisers in the DoubleClick Performics Affiliate Network have access to geographic location at the state level through the 'advanced search' feature.Read full article
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New York Affiliate Poll
If a merchant drops you because you reside in New York, would you consider doing business with them in the future if this law should be reversed and they want you back?
Which States May Be Next?
CFO.com's 2004 State Tax Survey lists the five most aggressive states when it comes to sales taxes (including New York):
* California
* New Jersey
* New York
* Massachusetts
* Texas
Merchants Drop North Carolina Affiliates
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- Renee Ellmers, a freshman Republican from North Carolina, said that given the lack of progress at the negotiations, she believes ?it is prudent for our leadership to have an alternative strategy moving forward.? Rep. Tom Reed, a freshman Republican ...
- Tax Tips of The Week - February 14, 2012
- by FOX Charlotte Perry Webb, of local accounting firm, Webtax, offers answers to the most frequently asked questions around tax time. Q. CAN I CLAIM MY BOYFRIEND/GIRLFRIEND AS A DEPENDENT? A. It depends on the resident state you live in. North Carolina ...
Stay Informed
Tax Talk
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JaguarJulie
Jan 30, 2012 @ 3:51 pm | delete
- Taxes, taxes, taxes!!! Good grief, but just yesterday I was reading a synopsis of taxes with regards to filing our income tax returns ... along with stern warnings of how we need to be careful and vigilant as many things have changed this year. I'm telling ya, it is a taxing situation!!
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grandmamarilyn
Jun 30, 2011 @ 10:15 am | delete
- I don't see why they need to collect the taxes. I pay my taxes on anything I sell whether the taxes were taken out for me or not. I claim all taxes so Texas gets them anyway.
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excalibur
Jan 14, 2011 @ 6:39 am | delete
- This is a great article and people need to go further than this. You need to go to your Senators and House of Representatives and petition them to reverse their decision on the tax laws. People do have the power to respond to these things if they will only take the step. Reversal will come but you have to make your voice heard and the more that speak up the more will be done. You say you are but one voice. But what if everyone took that stand. Nothing would ever get done. Think about it and take action.
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excalibur
Jan 14, 2011 @ 6:33 am | delete
- Take this article to your congressman and women and pressure them for changes.
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thrivingmom
Dec 23, 2010 @ 9:20 pm | delete
- Thanks, Janet. Lots of great info here. I'm in one of the states on your maybe who's next list, Texas.
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