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Just a few weeks ago, the U.S. Senate approved a seven-year extension for the moratorium on the taxation of online purchases.
The original moratorium, passed in 1998, was set to expire November 1st. But both the House of Representatives and the Senate have passed extensions. The version from the House was for four years.
But New York Governor Eliot Spitzer wants all Internet taxes all the time for citizens of the Empire State, according to the New York Sun.
“New Yorkers going Christmas shopping online at Amazon.com will find an 8.375% surprise at the virtual cash register, courtesy of Governor Spitzer, who is moving aggressively to collect Internet sales taxes that have gone widely unenforced.
Under a new policy, major electronic retailers, such as Amazon.com, will be required to collect sales tax on all purchases from New York. The policy, based on a novel legal theory, could hasten the end of the Internet’s era as a duty-free marketplace if other states follow New York’s lead.”
In the past, online retailers were held to the same standard that the U.S. Supreme Court set for mail-order vendors: The seller only needs to collect the tax on purchases in states where the vendor has a physical presence, such as a storefront or salesman.
But according to a tax memo recently released by the New York state tax department, companies will lose this exemption if they have affiliates.
“At issue is the “affiliate program” used by many e-retailers. Web site operators can provide a link to an e-retailer in return for a commission on any sale resulting from customers using the link. While the affiliate program may consist of little more than a non-descript advertisement on the computer screen, the tax consequences may be huge: New York state says it is the equivalent of having an instate salesperson.”
On the heels of Spitzer’s humiliating decision to abandon his plan to issue driver’s licenses to illegal immigrants, he comes out with this whopper?
I could see this having negative ramifications on a company like Amazon - all of a sudden it’s less attractive to customers to purchase from them. So Amazon might decide to stop working with affiliates in New York if that’s what it takes.
Net result: tens of thousands (or more) of affiliates in New York with less money in their pockets.
Or maybe the affiliates could get hosting in other states (if they don’t have it already)? If their Web site doesn’t reside in New York, perhaps this would be null and void?!
Anyhow, Merry Christmas, Grinch Spitzer.
10 responses so far ↓
1 Vijay Teach Me $$ // Nov 14, 2007 at 2:51 pm
Wow whats happening to New York, now we have to pay taxes for goods bought online and now the affilaites tax….
2 Brook Schaaf // Nov 14, 2007 at 4:36 pm
Great post. Terrible idea. I hope this does not hold up in court or have a harmful effect on the industry.
3 Colin // Nov 14, 2007 at 7:38 pm
Spitzer is a media hog, so affiliates should put some pressure on him, and he will change his mind.
4 Shawn Collins // Nov 14, 2007 at 10:50 pm
For once, I’m glad to see a flip flop. Gov. Spitzer has decided not to do this, according to the New York Times.
It’s liberation day for affiliates of New York!
5 Brook Schaaf // Nov 14, 2007 at 10:55 pm
I credit AffiliateTip for fighting the good fight and winning.
6 Brook Schaaf // Nov 14, 2007 at 11:38 pm
I posted on the NY Times page. I am uneasy about ideas like this, which may pop up in various states.
7 Shawn Collins // Nov 15, 2007 at 12:36 am
Nice comment, Brook. Just made one of my own.
I wonder how many pure lay sites have affiliate programs and would be impacted by this?
Off the top of my head, I think all these apply… Amazon, Buy.com, Overstock, Zappos, etc.
I wonder how Avon was treated in the 70s/80s for this matter.
As far as I recall, they didn’t have any retail stores - just reps working out of their houses all over the country like affiliates today.
8 Brook Schaaf // Nov 15, 2007 at 1:22 pm
Debbie Carney posted there, too.
9 Karen Garcia // Nov 15, 2007 at 2:35 pm
I’m glad Spitzer changed his mind on this as it’s a horrible idea to begin with, but it does bring up a problem that managers have struggled with for years: transparency. If for some reason a merchant decided carte blanche to stop working with affiliates from a particular state, removing them and/or not approving them would be next to impossible on many networks simply because the information is not available to the manager. If something like this was ever put in place, it would be an absolute nightmare of constant policing.
10 Oops!… Spitzer Did It Again | Affiliate Marketing Blog by Shawn Collins // Feb 14, 2008 at 4:41 pm
[...] my RSS feed or enter your e-mail on the top right to get updates by e-mail.Back in November 2007, I wrote about how New York Governor Eliot Spitzer wanted all Internet taxes for all Internet transactions by residents of New [...]
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