GTO Management

The State of New York’s recent attempt to collect sales tax from merchants who use New York based affiliates to market their products has been the buzz of the affiliate marketing industry over the last few weeks. Essentially, the argument of the state is that if merchants are working with affiliates who actively market their products via the web, email, paid search, etc., they have established "nexus" or a physical and tax liable presence in New York.

This development has led to some strong reactions from frightened merchants who fear that collecting tax on sales made in New York would cost them both sales, as well as add technical and administrative costs that they are not eager to incur. Some programs like Overstock.com have effectively fired their New York Based affiliates, and many more merchants have kept their New York based affiliates on board while sharply restricting the promotional methods they can use.

Karen and I sat down to chat about this with Clarke Douglas Walton of WaltonWebLaw.com this week and we covered several aspects of the issue.

• The federal constitutional issues involved in states passing laws that impact Inter-state commerce "Commerce Clause."
• Vague language of the law itself. The types of marketing that seem to be allowed by affiliates.
• 3 potential approaches that merchants could (and have been taking) to deal with the issue.
• The looming trend of states looking to move towards collection of sales tax on online sales.
• The role (if any) of New York offices of the major networks (CJ, Linkshare and Performics) in establishing nexus.

Enjoy - For more coverage of this issue, we recommend following the discussions on ABestWeb, Revenews, and the 5 Star Affiliate Blog