Stupid New York Tax Law Gets Affiliates Axed
How’s this for stupid? New York state brings in a new tax law that makes out-of-state businesses with New York based-affiliates collect sales tax on Internet purchases made by New York State residents, if the company’s affiliate sales in the state exceed $10,000.
By result, merchants that don’t want to deal with additional tax collection are dumping their New York-based affiliates.
Overtstock has notified it’s 3400 New York based affiliates that they’ve been dumped effective June 1st, 2008. One New York-based affiliate on Shawn Collin’s blog commented that he’d already been dropped by 4 Linkshare merchants.
Amazon, on the other hand, will collect the tax but it is also suing New York state for introducing a law that it deems unconstitutional. Bravo, Amazon!
Brook Schaaf of MediaTrust has put out a call to all affiliates proposing a new industry association.
Appears to me to be a lose-lose-lose situation.
Consumers won’t be keen to pay the additional tax, so they’ll buy less. Merchants that terminate affiliates will earn less. And in a state where more than 1.86 million residents (about 1 in 10) are already food stamp recipients; New York’s affiliates will earn less, thereby reducing tax inflow and increasing the size of the breadlines.
This ploy to weasel $50 million bucks more out of New York taxpayers’ pockets is especially heinous considering how ordinary citizens are already having a hard time making ends meet with high prices for food, fuel and escalating unemployment.
What a great contribution to an economy already in shambles… not.
Are you an affiliate living and working in New York state? Has your association with some merchants been terminated recently due to this new law? How do you think that will affect your bottom line? Please share your thoughts by leaving a comment below.
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Posted / Revised on May 19, 2008 under Affiliate Marketing, Make Money  |
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This “tax the masses” mentality is exactly why I moved out of New York 9 years ago.
Makes me glad to live In Australia, where the tax system, although complex (aren’t they all?) has a single collection system, at the federal level.
There are no state sales taxes or income taxes. Only one income tax return to file. (Although businesses can file monthly, quarterly or annual Goods and Services Tax returns, depending on their size and revenues.)
This NY tax-grab is sheer lunacy. One cna only wonder how much it will cost the state to collect it.
John
A question springs to mind: how does NY state force out-of-state businesses to comply if they have no jurisdiction outside the state?
And non-US businesses?
We have a saying here in Oz that describes the mindless greed behind it all:
“Never get between a politician or bureaucrat and a bucket of money!”
John
I believe that even if a business is out of state, they have to comply with a given state’s tax laws if they conduct a business transaction in that state. Kind of like how you have to obey another state’s road laws if you drive through it – doesn’t matter where you live, it’s where you’re driving.
That’s probably vastly oversimplified, but I think that’s the crux of it.
But if you’re not physically in NY state, unlike driving through it, how do they enforce compliance? It’s a bit like the proverbial old lady crying “Officer, arrest that man — he’s whistling a dirty song!”
I won’t be dropping any of my NY-based affiliates — and I won’t be collecting any taxes for NY state, either.
Let’s see how they go about forcing me to comply with their poorly conceived and drafted laws… or stopping me from doing business in NY state via the Net.
John
Hello
Yeah, I had 2 of my biggest affiliates. Now I have to re-do my site, and also change how I am going to do the website since I really liked these two merchants.
I am from NY.
Can’t you rework your campaigns, make them geo-targeted & stop New York
advertising from coming up when a keyword is searched.
Also a statement on your website “No New Yorkers Can order” and cite the tax law.
That should tick the voters off
I was also dumped by 2 others but they did not have the impact on my website as 2 of them. So I had a grand total of 4 dumping me, I feel so rejected.
Hi James,
Time to look above and beyond to those merchants who will (until such time as the tax law is revoked) pay the tax and keep their New York based affiliates.
Best of luck!
Ros
What complete lunacy! If other states follow suit, we are all screwed. You are so right Ros! Times are tough all over and there is no clear concise answer but this is not the answer! What were they thinking??? Really makes you wonder! if they have a brain at all! (If they do have a brain, are they really using it?) Right on Amazon for saying ‘no’!
This lunacy on the part of New York State legislators drives home once again the importance of having countries with very competitive tax systems, aka “tax havens” in taxaholics’ parlance. As long as there are highly-competive low-tax countries where we can operate, the taxaholics have some reins on them. Rein in the taxaholics!
I certainly do not want affiliates based in NY. I’m just too small to deal with the tax issues and tons more paperwork when I’m already buried in the paperwork morass. Time to head to a lower-tax, lower-paperwork home base for me!
Hi J.
You said it ALL with “I certainly do not want affiliates based in NY” and unless I was a big-time operator, I would be inclined to think likewise.
How very sad for small businesses and their affiliates.
Ros
Unfortunately I’m not surprised by this move, and I fear that even if Amazon wins their case, it won’t stop this kind of behavior from eventually spreading here in the US. It’s already quite common that any mail/phone/internet merchant in the US has to charge sales tax to customers in other states if the merchant has an outpost/department/presence in that other state. It seems that NY is trying to extend that already-established precedent to include affiliates as well. I presume that part of Amazon’s case will be the fact that affiliates are independent contractors – not employees of the merchant.
Also at play here in the US is the attempt of some politicians to require ALL online/phone/mail merchants to charge local sales tax to customers as a matter of regular business. I fear that this will eventually happen, although I’ve been known by my friends to have a pessimistic streak.
I should remind Ney York State that this tax grab is the kind of thing that the Communists in the old Soviet Union would have been proud of.
It beggars belief that a so called “democratic” institution could introduce such a measure without prior consultation.
Hey Patrick,
I think Vladimir Putin and his puppet, Dmitry Medvedev, would also be duly proud of New York’s latest move.
Cheers,
Ros
Wow. I’d say the Fathers of NY State have got it perfectly wrong – they should be encouraging exactly the opposite, depending on whose interests they have at heart, of course.
It’s a blessing being able to earn a living online, driven home with every fuel hike.
Good on Amazon. I think the attention this case will attract will do wonders for affiliate ‘profession’ as a whole.
Perry
Cape town
South Africa
Sure sounds like a good time to start thinking about relocating your LLC to Bermuda or the Cayman Islands if you’re a business with a lot of NY-based affiliates.
Use the tax savings to pay for an annual holiday there!
John
I don’t know you guys. I think the companies are a little short sited in dumping their affiliates. The affiliates are running a business so go get a tax number and charge sales tax and pay it to the state. All other retail companies have to collect tax. The companies should make that a requirement of becoming an affiliate. We all knew this was coming at some point. It’s here. Rome will extract what it wants. Ya gonna throw the tea in the sea again. There’s no new land to run to to start over. And who in the hell wants to live in Antarctica.
)) Pay the tax. Sell more.
You’re ignoring a fundamentl principle here — and a serious threat to the entire direct selling business model.
Every nation’s tax collection agency drools at the prospect of having direct sellers (whether they’re commission-only reps, network marketing distributors, party-plan reps, etc etc etc) become categorized as employees instead of independent business operators.
Then they can slam companies for income tax installments, payroll tax, etc so that the companies become the de facto tax collection arm.
You can bet dollars to donut holes that, if companies begin paying the NY state tax on behalf of affiliates, this will become the proverbial “thin edge of the wedge” for the IRS and others to crawl all over the entire direct selling scene, using it as a precedent.
So let’s drop the “just do it” argument and relegate it to the same place as “just hit the delete button” spam-tolerance argument and the “jut put your foot down” (in that bear trap) argument. They’re NOT just a misguided form of “accept reality” practicality. They’re based on blind ignorance of the consequences.
John
John,
I am with you on this one. Taxing agencies having been using business owners as their collection agencies since tax laws began. If we don’t gripe and complain about it they will continue to use and abuse small businesses whenever their incompetent burecratic little minds want to. If you don’t believe this when was the last time you got “paid” for collecting taxes for any governmental agency? And who did the paperwork for you that was “required” under penalty if it was not submitted or submitted on time?
Rich
Here’s my Q: Where can one rent reasonably-priced mail box collection/re-mailing services in Canada? You know, the kind that have a physical address and Suite Number as well as a phone number and voice mail forwarding (sort of like google’s grand central, but in canada) and will package everything up and mail it to you every so often?
anyone know?
a possible biz idea for and aspiring and dependable canadian entrepreneur perhaps?
thx
just — sayin’
Hi,
You might want to try Mailboxes Etc. or other similar service.
Cheers,
Ros
The problem with our governments: federal, state, and local today is they have unlimited taxing power without asking the people, us, that they supposedly represent, if this is our wish. This is the root of all tax issues in the United States.
If you could give yourself a raise anytime you wanted to whether or not you were doing your job wouldn’t that be a great position to be in. That’s what we currently have. What we need is pay for performance in all our governments and this taxation without representation would stop.
These governments should improve on waste and stupidity and they wouldn’t need to increase taxes.
Let’s hope Amazon wins this case and sets precedent for all states to think before they act. Now there’s a new idea!
Rich
Hey Rich,
I dunno… I think that governments in general have perfected waste & stupidity.
Sorry, just had to say it.
Cheers,
Ros
Ros,
We are in short supply of leaders in this world and especially when it comes to governments. And those that are in positions of authority, have perfected waste and stupidity and taken it to new heights.
By the way, I just bought your affiliate book and I am looking forward to learning from the master. Thanks.
Rich
And this is one of the many reasons why I live for the day when I can leave NYC forever.
Reg (Living in NYC and sweating it).
Ros said it best. “I think that governments in general have perfected waste and stupidity.”
Understatement of the year!
Carolyn
I agree with Brad. I also moved out of New York because of their tax laws wanting to squeeze every penny out of your earnings.
Just to have an LLC, even if you don’t make any money with the LLC requires a yearly payment of $400 or so dollars.
Not to mention state and city income tax.
Thank you Amazon. I hope they win !
I don’t live in NY, not even in USA, but looking at that situation from abroad, IMHO this is a ploy for the government to finally get a piece of the Internet Marketing cake and at the same time put IM companies against the wall as tax collectors (as some commenters have stated before).
Furthermore, if we are going to believe on some conspiracy theories floating around, this could be another step from colectivism and monetarist powers to eliminate the threat (to them) of an increasing number of people becoming financially independent, dollar-independent (think about e-gold and other gold-backed e-currencies brought to their knees by IRS), and hardly taxable.
Boy, just what New Yorkers needed on top of their other financial problems. I must say though, my apartment building is owned by Albertans and Americans and when they bought the place, the agent told us that we were now subject to US laws. I live in British Columbia and of course, spoke my mind quite loudly, but you would be surprised by how many people just took what they claimed was fact to be fact. Excuse Me? Since when? Time to move your business offshore. Some of the banks even provide a drop e-mail and drop snail mail forwarding service. :O Direct deposit anyone?
Look at all the money being spent on the election….. boy what some poor people couldn’t do with even a tenth part of that! Canadians can’t talk of course, look at our own mess!
Good luck to Amazon!
They say freedom is not free. To this I have to say merchants that refuse to comply to out of control Government have counted the cost, and made a decision. It would appear that marketers will have to follow suit and leave NYC, and other state and city’s that follow, to there own devices. It has proven dangerous to throw up hands and pay these People there bribe money, as any people that have paid off the different moffias and gangs for there protection, have proven that growth is the only consequence.
I know control is best with my typing, but lets face the facts. The blind fold would have to be on not to see any similarities.
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.”
Just when I get excited about a candidate at the national level like Barack Obama, I see at the local level (I’m a New Yorker) that the Democrats are exactly what the Republicans say they are – a party looking for more and more exotic ways to constantly raise taxes. This is a stomach kick for alot of small affiliate businesses in New York State. All the Democrats’ talk of watching out for the little guy is alot of hooey.
Just another tax on top of another tax which is on top of another tax.
If the government can tax it, they will, lol!