NOTE: This is big news that could affect our industry in many ways.
Be sure to read 2nd quote down.
Amazon Sues New York State Over Affiliate Related Sales Tax
In case you haven't heard New York State did pass that new tax law,
I blogged about a couple weeks ago. The new law, dubbed the 'Amazon Tax', states that if companies like Amazon have even one affiliate in New York they must charge all customers sales tax, even though Amazon has no office, store or employees in the state. So in essence the State of New York is considering affiliates the same way they would a company that had a physical store in the State, even though affiliates are not employees or even independent sales reps.
Collecting this additional sales tax is expected to bring the state an extra $50 million this year. That will hike the consumer price up by 8.375% for goods bought through Amazon, which will cause some customers to buy from other eTailers that don't have to charge sales tax.
So Amazon is fighting back!
See copy of the actual complaint Amazon filed against the State of New York.
New York Times: Amazon Sues New York State to Void Sales Tax Rules
"Amazon said that its affiliates are not agents but simply sites on which it places advertising. The commissions it pays the sites are simply one method of paying for those ads, it argued.
The online retailer further claimed that the new rules violate the equal protection clause of the constitution because it specifically targeted Amazon. “It was carefully crafted to increase state tax revenues by forcing Amazon to collect sales and use taxes,” the complaint says, noting that “state officials have described the statute as the ‘Amazon Tax'."
NOTE: I'm adding to this story as I find good info. So keep checking back!
Newsday: Amazon, or online, tax will hurt small business
"But the reality is that Amazon and other merchants with affiliate programs won't bother adding the additional capability to collect New York tax; instead, they'll take the far easier step of blocking any New York-based site from their affiliate programs. The result will be a tremendous loss of income for the numerous small New York businesses now participating in affiliate programs.
The law will also hurt companies like New York City-based LinkShare, which generates revenue by managing others' affiliate programs. And it may make it harder for New York-based online retailers to find their own affiliates."
Another big concern as I mentioned in my 1st blog post about this a couple weeks ago is that if New York gets away with changing the law regarding tax nexus, other states are sure to follow.