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
AK816 says:
This is absurd. NY just loves finding ways to nickel and dime the residents.
Posted February 03, 2009
Mad Stratter says:
Eff it in zee bum!
Posted January 04, 2009
lakeerieartists says:
They may have the right, but it is not a well thought out plan. They will end up losing taxes all around and angering their residents.
Posted August 18, 2008
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
What are people saying?
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
- More States Seeking "Amazon Tax" Sales Tax Laws
- What is the "Amazon Tax?" As I reported in June 2009, New York was the first state to attempt to impose sales taxes on remote sales (over the Internet). Sales taxes are imposed on businesses which have a presence (called a "nexus") in a state. ... If you are an associate or affiliate of a larger company, you may already have been affected. Amazon, for example, has threatened to pull its New York Associates out and Overstock is looking at doing the same for states like ...
- Durango Herald News, 'Amazon tax' roils Colorado retailers
- But U.S. Supreme Court rulings have forbid taxes on companies that don't have a physical presence in a state. New York's Legislature decided in 2008 that ?affiliate marketers" establish that presence. Affiliates typically are people who ... sales tax on ANYTHING we buy and ship from ANY other state, or country for that matter. Would Colorado want property taxes on homes we own in oter states, too. This really comes under the Federal Source Tax law and is unconstitutional. ...
- The Way I See It: State of Affiliate Marketing Part 2 | ReveNews
- Unless you are an affiliate that's been living under a rock, you know about the offspring of the so-called Amazon Tax which was first enacted in New York. Since that time the states of Rhode Island, and North Carolina passed similar legislation; ... Second, visit the affiliate forums like ABestWeb which has an Affiliate Tax Laws category and look for the forum on tax laws in your state. If the forum does not have an active thread on your state, start something. ...
- Affiliate Tax Battle Heats Up in Colorado - Website Magazine ...
- ... they will be forced to terminate relationships of Colorado-based affiliates should the bill pass into law. Overstock has already implemented this measure in states where the bill has become law - New York, North Carolina and Rhode Island. ... The Providence Business News reports that Rhode Island has yet to collect any taxes as a result of the tax law. In addition to the lack of collection, less taxable income is being produced in the state. Amazon has already dropped ...
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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
- Colorado Advertising Tax is Dead!!!!
- I hope that a change can come about in. North Carolina since they made a change for the affiliates in Colorado and hoping they will realize that the tax law they passed in 2009 has hurt the affiliates and wanna be affiliates in NC. ...
- Dollars And Nonsense » Blog Archive » Colorado considers new ...
- As online sales have grown and state tax revenues have dropped, at least three other states ? new York, North Carolina and Rhode Island ? have tried to get out-of-state retailers to start collecting taxes. the U.S. Supreme Court has ... Colorado was headed that same way until the state's approximately 4200 affiliates ? many of them small, home-based businesses ? began warning lawmakers that online retailers would just cut ties to them, as they had done in those other ...
- Wilmington, N.C.: Tax credit helps housing market rebound
- Wilmington, N.C.: Tax credit helps housing market rebound. Home sales rebounded from a slow start when a boost from the first-time home buyer tax credit kicked in. The buyers who took advantage of it accounted for 34% of home sales last ...
- Affiliate Tax Battle Heats Up in Colorado - Website Magazine ...
- Overstock has already implemented this measure in states where the bill has become law - New York, North Carolina and Rhode Island. And while Overstock is the most outspoken on the issue, it won't be the only online retailer to shut ...
Stay Informed
Tax Talk
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- nyfamily5 nyfamily5 Jan 22, 2010 @ 11:57 am
- Thanks for the info on NY state tax law. Very informative
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- EverythingMouse EverythingMouse Jul 9, 2009 @ 7:58 pm
- An excellent overview of all the issues. Angel Blessings to you for such a great resource.
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- Leigha Baer Leigha Baer Jul 3, 2009 @ 11:03 am
- As a former NY resident, I am not surprised by this law. I do not support this law and think that it is going to COST the state money as opposed to increasing the states revenue. Just like NY to add another tax. They try to tax everything and it has hit the areas outside NYC especially hard.
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- Sep 5, 2008 @ 3:45 am
- This lens sounds very useful for people and I rated 5 stars for your valuable lens. It has very great information
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- lakeerieartists lakeerieartists Aug 18, 2008 @ 12:18 am
- The stupidest thing about this decision is that it will cause New York residents to loose income that is proving their families with a means to live. Therefore, NY will lose income tax by claiming the new tax, and also lose out on the new tax when their affiliates get dropped.
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