Affiliate law sends e-commerce companies running for the hills.
New York residents already feel the pain of high taxes. But now the state has basically shut down many of its resident’s businesses that rely on affiliate revenue, including domain name owners.
In an effort to collect more tax revenue, the state decided that companies (namely Amazon.com) that have affiliates in the state technically “have a place of business” in the state. Thus, they are required to collect and remit sales tax on purchases shipped to New York.
What the bureaucrats in Albany didn’t think about is how companies with affiliate programs would react. I just received an email from Collectors Choice Music with the subject line “NY AFFILIATE NOTICE AND TERMINATION”. Here’s what it says:
Due to recent changes in New York law relating to the collection of sales tax, Collectors’ Choice Music, Inc. (CCMUSIC.COM) will no longer offer its products for sale through affiliates or other representatives (the “Affiliate Network”) that are residents of New York State and that are paid a commission on such sales. Accordingly, CCMUSIC.COM is hereby immediately terminating all participation in the Affiliate Network by all affiliates that are New York State residents through all performance marketing networks. A New York State resident is (a) any individual who maintains a permanent place of abode in New York State and (b) any corporation incorporated under the laws of New York and (c) any corporation, association, partnership or other entity doing business or maintaining a place of business in New York State. (See New York Sales and use Tax Regulations Section 526.15, 10 NYCRR Â§526.15.)
Therefore, if you are a New York State resident, your participation in the Affiliate Network is hereby immediately terminated and you must immediately cease and desist from any referrals of sales to CCMUSIC.COM and remove any links to all websites operated by Infinity Resources, Inc. and its subsidiaries, including without limitation Collectors’ Choice Music, Inc. dba CCMUSIC.COM, from your website. [The change in the law does not require CCMUSIC.COM to cease doing business with or through affiliates who simply advertise CCMUSIC.COM’s products without compensation or who are paid a fixed amount on a “per click-thru” basis (“Affiliate Exemption”).]
Granted, Collectors Choice Music isn’t a big e-commerce company. But if other online stores ditch their New York affiliates too, then the income of New Yorkers participating in affiliate programs will drop substantially. And that means New York won’t collect as much sales tax.
Brilliant. Simply brilliant.