I throw out lots of opinions and speculations here. Generally, I am totally serious, but last month it was with hyperbole that I wondered if Amazon would stop working with New York affiliates.
That question stemmed from New York State’s new law mandating that online retailers collect sales tax on Internet purchases to state residents, even when the retailers have no tax nexus in New York.
This was the brainchild of disgraced former Governor Eliot Spitzer, and his successor David Patterson carried the torch of this desperate, unreasonable ploy to compensate for excessive state debt.
Anyhow, Amazon filed a complaint in State Supreme Court in Manhattan objecting to the new law.
But since this new tax kicks in on June 1, online retailers can’t hold out for the resolution of the Amazon complaint.
Today the Small Business Blog reports that Overstock.com has issued a notice to all New York state affiliates that they are being dropped from the Overstock Affiliate Program, effective May 20, 2008.
Here is the email sent today by Overstock:
The email references a letter from Geoff Atkinson, Vice President of Overstock, with additional details of the situation.
That is an unfortunate, yet understandable move. I expect to see other large online retailers do the same.
Nice work, Governor Patterson. You’ve effectively put innumerable small business people in New York out of work, and more are likely to follow.
Maybe, just maybe, you shouldn’t rubber stamp everything in your inbox from the Spitzer days. I’m just saying.
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@Charles Goldie:
This post is from May 2008 – far before there was a discussion of an advertising tax in California.
See http://blog.affiliatetip.com/archives/governor-schwarzenegger-terminates-advertising-tax-in-california/ for the latest in CA.
Your Message@Shawn Collins:
I don’t think so, Amazon is shutting down in California or that is what is going around right now I hope not.
@Jason:
I’ve been monitoring it in NJ and haven’t seen any sign of it so far.
Thanks for sharing. Does anyone know if New Jersey will be following suit?
New Yorker’s are getting over taxed on everything. I hope the next election will bring change.
Wow, that’s really messed up.
So, I wonder if California will be facing the same issue soon? I’m actually from Cali, but moved to Texas temporarily to spend more time with family. Was looking into buying a house, but now I hear Cali will be doing the same damn thing as NY?
This is lame.
am just a little confused to how any affiliate can be responsible for the sales tax.
Thanks – I aven't failed to mention the repeal updates. See…
http://blog.affiliatetip.com/archives/status-of…
http://blog.affiliatetip.com/archives/vote-to-r…
This entire case has really been fascinating to me. Thank you for your great coverage. But you have failed to mention the most recent developments. I read on Seeking Alpha for instance that New York State has voted to repeal this horrible new law. You should include this information. You can read the article here:
http://seekingalpha.com/article/86766-amazon-ov…
Don't put all the blame on Patterson. This is a New York tradition. New York used rapacious tax ploys throughout George Pataki's term. He liked to rail against “job killing taxes” while the finance people used every dirty trick they could think of to squeeze small businesses out of a few more pennies.
I finally moved out of New York because of those Republican job-killing taxes. At the least the Dems aren't hypocrites like Pataki. They love to tax and they do.
Hey come up to Canada. I'm sure we can get our local economic development council to help you with the business registration
Well in technicality Native American reservations are not subject to NY or US laws.
I think that NJ will follow if Amazon does not win the lawsuit. In fact I would expect most states to do the same if Amazon doesn't win, which I think they will. Amazon and Ebay can't have a whole state where no one can sell so they have to win.
Good idea! My thoughts exactly!
I agree! We have the worst taxes than almost any other state. It is stupid that the Indians don't have to pay taxes but we have to pay exorbitant taxes on everything. And the Indians make easy money doing something that is illegal for any other citizen to do.
I don't think law was made for affiliates (though it may apply) but to those selling on Amazon or Overstock. I doubt Amazon or Ebay will kick out NY affiliates or even those sellers based in NY. The best way to avoid this is to start a corporation in Delaware or Rhode Island (I think those are the best states) and run your affiliate business through that.
Good point Shawn.
I am actually getting a PO Box in PA and use that for my affiliate business.
My programs where all under Linkshare. What is now pissing me off why is Linkshare sitting on there @%! and Amazon is doing the fighting. Linkshare is a NY company that is suppose to have a flourishing network of affiliates.
Isn't New York great. They can't get the Indians to pay tax so why not go after the internet?
> at the temporary expense of affiliates
While the dumping of affiliates in NY by Overstock might be a temporary measure in the eyes of Overstock, I wouldn't be surprised if affiliates didn't trample each other if/when they are given the chance to rejoin.
Just several days to take down links, in some cases where they are extensively integrated into sites via the data feed, is not going to breed goodwill with affiliates.
And make no mistake, affiliates are customers, too.
Overstock has done the right thing for end customers, which should be FAR more important than affiliates during this rocky period for Internet etailers and their affiliates. As a NY based website operator that has affiliate programs in place, I am not at all upset by Overstock's move and, in fact, consider it a win-win. As the lawsuit plays out, those retailers that demonstrate a commitment to their customers, even at the temporary expense of affiliates, will generate a lot of goodwill and keep sales even. Amazon is losing my business on 6/1 (as well as a lot of other NY customers who will find better deals elsewhere), so that's revenue Amazon affiliates will never realize anyway, and if I as a customer get used to buying from an alternate supplier, why ever patronize Amazon again?
Guess what, customers should be more important than affiliates.
And manning the barricades against this case in NY is critical, because at least a dozen states are admittedly watching to see how this plays out, so they can impose their own similar laws. Everyone will have to sacrifice something to fight this. NY residents are bugging their elected officials about this as well.
Thank you for the link Shaun. This is an issue that can become a problem for the industry if we as an industry don’t address it. Please spread the word as we work with the IAB to assemble information about the impact this has on affiliate marketing. I will send updates thru Twitter http://twitter.com/mediatrust , http://www.RelevantlySpeaking.com and the affiliatepetition@gmail.com
It is very important that we collaborate as a community around this. The industry is fragmented and most affiliates are to small individually to have a voice. As we say at MediaTrust †we are stronger as a collective then as individualsâ€. We all need to create a community voice and nip this or address it in a meaningful way. I believe leveraging the social media can help spread the word.
It was pointed out in a thread at ABW earlier, but I'll state that it's curious to me that Linkshare merchants have been the ones removing affiliates… While it could be stated that we each (as affiliates) have business relationships with our partners, is that necessarily true if that “agreement” was digitally signed through a network?
Especially if that network isn't based in New York…… such as Linkshare is….
There is talk about forming an industry association – see http://www.revenews.com/brookschaaf/a-new-indus… – I think all parties should comine to work together on this.
Shaun we see this as a growing issue that needs to be addressed.
http://www.relevantlyspeaking.com/2008/05/15/wa…
we have started an email to get our community pro actively working together around this issue. we have set up affiliatepetition@gmail.com to create a central gathering point to begin a working community effort
please lets all get involved!
In a time when our economy is already taking the hit from high gas, prices, food prices, a depressed real estate market and rising rate of unemployment we get a hit with yet another reason to lose faith in our politicians. Way to go Patterson you've just alienated the small business guys and gals trying to make an honest living! And there are lot's of them…..
I wonder if the indictment of the Missouri woman in the MySpace cyberbullying case could matter here?
Even though she was in MO, the case is taking place in Los Angeles, since MySpace servers are in CA, and it was determined that is where the bullying took place.
So, if Overstock has their servers in UT or anywhere but NY, couldn't a similar argument be made – the transaction is never in NY.
Or what if the affiliate's site is hosted in another state?
I am in NJ and my site is at RackSpace in San Antonio.
Hey I was actually axed because of this and I would rejoin them in a heart beat since I really like dealing with them and think they are great or I would have never started promoting them in the first place.
I had 4 cancel on me.
Well 2 are the same company Dr Smith and Foster and LiveAquaria
Albris
Overstock
Thanks
New Hampshire, Alaska, Delaware, Montana and Oregon.
I'm only aware of 3.
Out of curiosity, has anyone been tossed from a program that wasn't an independent or on Linkshare? (feel free to read into this question…. it's loaded)
What 5 States are those?
So true
For sure – NJ loves money out of my wallet constantly.
We're NY's cousin of corruption, wasteful spending and excessive taxes.
Well NJ loves taxes to.
Has anybody seen a tally of all affiliate programs that have pulled out of NY?
Here was one of my termination which came before Overstocks. This was my biggest merchant.
From: LiveAquaria.com <affiliate@liveaquaria.com>
To: xxxxxx@xxxx.com
Sent: Tuesday, May 6, 2008 6:05:12 PM
Subject: Notification of Removal from Program
Dear James Dorans:
Due to the new online tax law in New York State we have decided to remove all New York state affiliates until this issue is clarified. We regret having to do this and hope that after further clarification or the law being struck down, that we will revisit this issue and hopefully be able to resume the productive business relationships we have enjoyed with you.
We appreciate your understanding in this matter and look forward to working with you again in the future.
Regards,
The LiveAquaria Affiliate Team
Others merchants already done this like 2 weeks ago when it happened to me.
2 of them told me they would reinstate if the tax is defeated. I know that the 2 merchants are not as big as Overstock but still. Which is good but still for me, I have to redo my site.
Should be simple enough. May cause income tax issues on some levels. I think the bigger question is… Of the 45 states that have sales tax, who will be next? We'll all end up “registered” in 5 states.
Ok now I get it. What about affiliates registering their business in other
states? Screw the politicians. I mean it should not be that difficult for
some one from Manhattan to register their affiliate business in Hoboken?
It's not so much that the affiliate is responsible for the tax, but rather just that our very presence, meaning living in New York, creates a “physical presence” for Overstock in this case. Therefore, since they have a “location” in New York, they must tax New York residents.
Turns out Overstock also terminated relations with a Comparison shopping engine located in New York, as well as a printing company that they were paying for performance on coupon distribution. This new legal language extends well outside affiliate marketing.
Let's hope so. I am just a little confused to how any affiliate can be responsible for the sales tax. But I guess a law made by confused politicians suppose to confuse us.
I think it all depends on the result of Amazon challenging it – if Amazon is successful, I think the concept loses all traction in other states.
I truly hope New Jersey is not going to follow with this crap.
I think that's going to depend on the merchant, and what they were worth to them. Sure, lots of chest thumpers will say no, but a revenue stream is a revenue stream.
I was surprised by Overstock today. I'd be further surprised that if this gets straightened out, affiliates who were making money with them wouldn't come back.
Now if it was a 2 person toe nail clippers company that booted everyone, that might be different. Unless I was selling a LOT of toe nail clippers.
I think Amazon will ultimately be successful in their challenge, but there will be collateral damage.
Will affiliates want to rejoin affiliate programs that booted them?
I just touched on this on my blog, but it's interesting to note that a nexus, via the Quill decision) is defined:
Nexus occurs from a sufficient physical presence, which can be an office or warehouse, but physical presence can also derive from soliciting a state’s consumers via sales representatives located in the state. However, it can’t be just any sales rep, according to another Supreme Court case — in-state representatives must be “significantly associated with the taxpayer’s ability to establish and maintain a market in the stateâ€
Based on that, we can assume that Overstock technically would have been safe… but how are we to determine which programs we are really providing that service for, and which we aren't?
Nothing better than a loss-loss situation. No sales tax AND lower income tax paid by former affiliates in New York. It doesn't get better than this.
This is very bad. The states are always following each other. My best guess is that this is the start of a trend that is going to have a significant ripple effect..
Ha! I was thinking the same thing. It makes me wonder who's next – buy.com? ebay? Hmm…
Not to mention bad timing – I wish the news came out before we did Affiliate Thing today, so we could have done some live commentary about it.
Wow that's pretty jacked.
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