May 14 2008
Affiliates in New York fired by Overstock.com
It was a business decision based on the newly enacted law requiring the collection of sales taxes on internet transactions generated by affiliates in New York, even if the company they sell for does not have a physical presense in New York. If I understand this new law correctly it required companies with affiliates in the state to collect New York sales tax on every sale they generate. This really gets complicated for all online companies like Overstock, and others as well. Will they all drop New York affiliates? I hope not, because it will end the opportunity for thousands of good affiliates who live there. The interesting economic question is” What is greater; the tax revenue gained or the tax revenue (income tax) lost from these out of work affiliates? The answer may astonish the New York legislature.
Some of the biggest affliates in the nation live in New York state, so just what are they going to do? At this point the effect is minimal, with only one big online retailer dropping these affiliates, but what is next? The possibilities are staggering, and a bit depressing for all of us in every state. After all, if one state does it, won’t there be some other states that will also want to do it?
Interestingly Amazon.com recently filed a lawsuit against the state of NY over this new law, but before it is resolved in court, there could be terrible damage to the entire industry of Affiliate Marketing. The new law, dubbed the ‘Amazon Tax’, states that if companies like Amazon have even one affiliate in New York they must charge all customers sales tax, even though Amazon has no office, store or employees in the state.
New York Times: Amazon Sues New York State to Void Sales Tax Rules “Amazon said that its affiliates are not agents but simply sites on which it places advertising. The commissions it pays the sites are simply one method of paying for those ads, it argued.
The online retailer further claimed that the new rules violate the equal protection clause of the constitution because it specifically targeted Amazon. “It was carefully crafted to increase state tax revenues by forcing Amazon to collect sales and use taxes,” the complaint says, noting that “state officials have described the statute as the ‘Amazon Tax’.”
Read this blog report about the issue on 5 Star Affiliate Programs.
Newsday: Amazon, or online, tax will hurt small business
“If New York wants a larger share of online sales tax revenues, it should focus on making the state more attractive for online retailers to set up shop here, and improve enforcement of existing tax laws. Instead, the Amazon Tax will hurt New York’s small online businesses and entrepreneurs, and ultimately may lower overall tax revenues, while strengthening New York’s reputation as being unfriendly to small businesses. Before it goes into full effect and the damage is done, the governor and legislature should delete the Amazon Tax.”I could not have said it better than the above article did. The New York legislature must repeal this terrible il-advised law. It will do far more harm than good. The intention is honorable, but it would be far better to generate more business in New York by making small business easier to conduct, and it would generate far more benefit to New York.
We will see how this all plays out. I think I will actually pray about this one. One of my favorite affiliate networks is in New York, called Linkshare
