New York Internet Sales Tax Threatens All Affiliate Programs

[Chris Lang]

Off the social marketing beaten path but you gotta read this....

From the NY Times blog today:

The state (NY) now says tax must be collected by any online store that gets customers referred to them by Web sites based in the state. In late April, Amazon filed suit challenging the state law. And on Friday, Overstock.com filed a related suit. Overstock, has stopped doing business with its affiliates in New York and so it will not collect sales tax for now.

Now I read the NY Times everyday and I have followed the Internet Tax thing pretty well. But I missed something along the way where NY started collection taxes from and I quote "online store that gets customers referred to them by Web sites based in the state"

We all better hope this gets struck down and other States don't try to follow suit. This could destroy entire affiliate programs everywhere.

Here is the NY Times blog link:

http://bits.blogs.nytimes.com/2008/06/02/let-the-tax-collection-beg...

And here is my own take on this on my blog, a little more over the top:

http://www.keywebdata.com/?p=92

[AndyBeard]

I have written about this a couple of times - good to check out blogs such as Affiliatetips.com, Revenews.com and 5StarAffiliatePrograms

I get taxed every time I buy something from Clickbank, no matter where I live in Europe

At the end of the day it needs to be a system that is equal, and doesn't place a burden on small business - it also needs to be in line with how catalogues are treated in the US

[Daniel Pyle]

Thanks Chris,
The laziness of government actually sickens me......taking from corporations
and ultimately dissuading the little guy from trying to make an extra dollar. The
American economy is an international joke and states executing their rights to
tax revenues is part of the reason why. It is in everyone's best interest to let
their state representatives and senators know that this is not acceptable. The
internet has allowed a global market to become accessible....the states are
extremely small when compared globally. If they would consider that fact then
surely they would allow and even encourage those who are doing business on
the internet to grow and thrive so that personal incomes could be taxed and the
economy of that state spurred by individuals looking to have a better life than
what is currently being offered in most corporate settings.

[Chris Lang]

If you don't know how desperate the states read my blog thru the link, I can go a little more of topic there.

[Chris Lang]

The US problem lies in each state wanting to tax the anybody they can.

So they will write things into each of their own laws that create a complete mess as far as doing business on the internet.

Pay attention to the part that reads like this:

"The state now says tax must be collected by any online store that gets customers referred to them by Web sites based in the state."

That is the end of all affiliate programs and we all depend on them to sell our products.

That is what is dangerous about state laws, each one is different. How am I as a business owner going to keep track of all 50 states own little laws?

Now lets say that each state does tax the sale.

Now all states will want to tax sales.

Not just the state where the business is located.

The state where the sale initiated (the buyer) in is also going to want to tax this sale.

So I will have to pay tax when I buy something to the state of Arizona (I live there) and the state that the website business in registered in.

At this point I am, as a buyer paying double taxes.

8% to the state of Arizona and what ever it is in the state where the business name of the site is registered. Just for simplicity lets say it is 8% like AZ.

Now I am paying 16% sales tax.

But wait, I found this site thru Google, and they are in California.

So now I owe the state of California sales tax too.

Use your heads people this is the end of all Internet sales. I as a web site owner would simply move my site and business to a Mexico server, see ya internet taxes and who would ever buy anything from a US website again?

The problem here is not Internet taxation, that is a given, it will come.

The problem is that each state creating it's own state tax code because they will, the states here fall a little more in debt each year, most go further into deficit each year.

They are grasping at straws and will do anything to make money. If you don't believe this read my blog in the link above, I go more into detail on how the state of Arizona will do anything to make money.

[DA PHILLY PHREEK...]

To keep it plain and simple..."Big bank take little bank"...Always a uphill battle for the little guy...Such is life...

[Rocque]

It is Internet Week in New York. How can they promote the Internet yet want to hurt it at the same time. Is the honorable mayor Michael B behind this tax? What a record keeping nightmare. I am sure that Amazon and Overstock do pay their taxes in their states, and affiliate marketers get hit by the IRS for their fair share. I hope this is all a myth. If NY is doing it, then the state I live in will follow closely behind. This could seriously hurt affiliate marketers.

[Chris Lang]

Funny you mentioned the IRS, self employment tax is 35% for those of you who have yet to file on Internet sales. Then the state hits you for 10% state tax.

Actually the Warrior forum is way more outspoken and this thread is hotly debated. The best information I have gleaned there is this: Overstock.com dumped all it's NY affiliates. Amazon kept theirs, is paying the tax, and suing NY.

Major bloggers and big time affiliates are losing their income that they built over years with blog posts that link to affiliate programs.

Another forum gave me allot of heat that this post was irrelevant to social marketing. WOW, if each state enacts it's own law like this, AdSense is gone, affiliate programs are history, most advertising is in jeopardy and major bloggers are left without an income.

How much more relevant can we get here? The very content that bookmarking site users post will be gone because bloggers will be out of business. Except for Digg where the most interesting thing is "The Worlds Largest Hole." Kevin Rose, put down your beer and your laptop, the future is calling. (that is for JohnT)

[Juliet Easton]

Great post Chris! I heard about this yesterday. I created a post on my blog about my take on some of the complications surrounding this issue also. Feedback would be great!

Juliet

[Chris Lang]

In NY, if the site makes more than $10,000 a year then referrers are required to be taxed and the referrer has to be in NY too.

Overstock.com dumped all it's affiliates in NY. Amazon kept theirs and is suing NY state.

The bottom line here is that the feds need to step in, take a 6% sales tax for the states and then divvy it up as they see fit.

What happend to the federal law prohibiting taxation of the Internet? I know that last extension expired but did they not re-enact it?

Wikipedia says: The bill has been extended three times by the United States Congress since its original enactment and was last renewed on October 30, 2007 for 7 years.

Damn greedy states, why don't the feds step in?

[Chris Lang]

Also my politically active buddies say that even though the feds make laws they are not very apt to step in and force the state to comply. Usually all they do is cut off federal funding to the state if they really pissoff the feds.

Then they leave it up to corporations to sue the state and then take it to the supreme court. Sounds like a good way to lawyers kids through ivy league schools and not much more.