[MichaelColey]

Originally Posted by PetsWarehouse.com

NY would have no way to verify the sales, I believe they, NYS has no authority to audit Amazon a foreign corporation. (meaning a corp outside the the state of NY.)

The way NY is arguing this, they're saying that the volume of NY affiliate sales generated by the merchant constitutes a physical presence in NY, thus giving them authority to require the company to collect sales tax for all NY customers.

A state can only require companies to collect sales tax for customers from their state when the company has a physical presence. Historically, that means that they have an office, a retail store, a distribution center, etc. NY is arguing that an affiliate in the state gives the company a physical presence.

If they argue that an affiliate in a state constitutes a physical presence by a company, what will they argue next?

• Using an ad firm in a state constitutes a physical presence?
• Hosting a web server in a state constitutes a physical presence?
• Having an employee that lives in a state (and drives to a bordering state to work) constitutes a physical presence?
• Having a non-sales independent contractor in a state constitutes a physical presence?
• Having a web site that is viewable in a state constitutes a physical presence?
• Having delivery trucks drive through a state constitutes a physical presence?
• Advertising on TV/radio/billboards in a state constitutes a physical presence?
• Contracting with a company in a state constitutes a physical presence?

These types of things are just as preposterous, but if NY succeeds with their current plans, I'm sure they'll continue to try to expand their jurisdiction.

[MichaelColey]

Originally Posted by Kevin

You're positive Michael? That's not the way I read that. I thought they were treating affiliates as "brick and mortar extensions" of Amazon (any program), and therefore any of my sales were taxable, since I'm a NY resident.

Positive. When a company has a physical presence in a state, they are required to collect sales tax on all sales shipped into that state, not just sales generated by the physical store. For instance, Wal-Mart (presumably--I didn't check) has stores in NY, so when they get an order at Walmart.com shipped to NY, they're required to collect NY sales tax.

Here's an article on Internet Retailer that spells it out pretty clearly.

New provisions proposed for a New York State sales tax law, if signed by the governor, would require out-of-state online retailers with in-state affiliates to collect and remit sales tax on purchases by New York buyers. ... Retailers doing less than $10,000 a year through affiliate sales are exempt from the law, the state budget spokesman adds.

[smallaff]

I think Kevin is right in that NY is looking at any merchant that has an affiliate based in NY is considered to have a "presence" or as Kevin said "Brick and Mortar extensions" in NY, and therefore are required to collect NYS sales tax. I'm not sure about the dollar amount, for example is it $10,000 in sales per affiliate or $10,000 in sales collectively through NY affiliates? This is where I believe merchants will find the whole process too cumbersome and just decide to terminate all NY affiliates.

To Affiliate Hound: I never meant any disrespect or to put this issue on the level of genocide. I was simply trying to make the point that anyone in the affiliate industry should be aware of this issue and how it may affect them - (either now or in the long term). If the industry itself does not take a stand on this how we can we expect anyone else to care?

It probably is true that eventually all internet sales will be subject to sales tax one way or another, but when the first instance singles out your business (meaning NYS based affiliate), it is difficult to keep a clear head in the matter. Not to mention just trying to understand what the law itself is saying, which is why I was interested to hear other affiliates (and merchants) take on this.

We are trying to get legal counsel on this matter and I would be happy to share the results of our efforts as they become available. I know this is a long post, I am new to this forum and I am still learning all the ins and outs.

[Kevin]

Thanks for the link, Michael.

[smallaff]

Yes, thank you for the link Michael, I do see now that the tax will be charged only to NY state shoppers. Also that several experts are predicting other states to follow suit.

[MichaelColey]

I found a page that has a more detailed, legal description of the new law:

http://www.newrules.org/retail/efairny.html

One of the things that hasn't been clear from other sites is how the $10,000 is calculated. Is it NY customers or NY affiliates? Is sales or commission? Is it the total of all NY affiliates or any single NY affiliate? This site makes it pretty clear (once you get through all the legalese). If a merchant has $10,000 in total sales from NY affiliates in the preceding 4 quarters, NY considers them to have a "nexus" in NY and they are required to collect NY sales tax for all shipments into NY.

[Bill]

Originally Posted by MichaelColey

I found a page that has a more detailed, legal description of the new law:

http://www.newrules.org/retail/efairny.html

One of the things that hasn't been clear from other sites is how the $10,000 is calculated. Is it NY customers or NY affiliates? Is sales or commission? Is it the total of all NY affiliates or any single NY affiliate? This site makes it pretty clear (once you get through all the legalese). If a merchant has $10,000 in total sales from NY affiliates in the preceding 4 quarters, NY considers them to have a "nexus" in NY and they are required to collect NY sales tax for all shipments into NY.

Which may give rise to (at least) one more question. Will that tax be retroactive back to dollar $1.00, or will it be assessed from dollar $10,001 and going forward.

Coincidently, two weeks ago Mrs. Beachy and I contracted to have a house built in southern Delaware, about 2 1/2 miles from our current oceanfront condo. We will need more room (grandchild/grandchildren?) and will give up our current "view" for more space, a garage and a picket-fenced yard.

So, why do I mention that? We will be moving from Maryland, who just raised a LOT of taxes to a state with zero sales tax. I will also be incorporating my business in Delaware in January of 2009. I'm sure Maryland will be jumping on any NY-tax-style bandwagon, so I will be in a more fortunate situation, being a Delaware aff rather than a Maryland aff. At least I hope so... (Plus, there are other real tax advantages.)

[MichaelColey]

It'll be on ALL sales (shipped to NY for merchants with a nexus in NY). The $10,000 is just to determine if the merchant has a nexus in NY.

[loxly]

Another option for merchants is to NOT ship in NYS residents. Perhaps if more than a few companies posted that they are going to discontinue shipping online orders to NYS that would get more residents involved and writing to their legislators.

As a merchant that is the "easy" temporary fix, and the one that might get the most attention to the new law to the general consumer.

[MichaelColey]

I love it, but I doubt any merchant would be gutsy enough to do that.

[Daniel M. Clark]

It would have to be a coalition of merchants anyway... customers would just go to the nearest competitor if it was only one or two people doing it.

[AffiliateHound]

Originally Posted by loxly

Another option for merchants is to NOT ship in NYS residents. Perhaps if more than a few companies posted that they are going to discontinue shipping online orders to NYS that would get more residents involved and writing to their legislators.

As a merchant that is the "easy" temporary fix, and the one that might get the most attention to the new law to the general consumer.

A big problem with that is that if the NY law is not voided by the NY courts early in the proceedings, other states will soon be passing similar laws, and merchants won't be able to say this about all of these states, unless they just discontinue their affiliate programs.

[Kevin]

So as an Amazon "nexus", what rights and privileges am I party thereto? ;p

[Rhia7]

Internetretailer.com has an interesting article on this topic.

The new law is expected to go into effect on June 1 and raise $50 million in sales tax revenue in the remaining 10 months of the fiscal year ending March 31, 2009, and raise $73 million in the full fiscal year ending March 31, 2010, a spokesman for the state budget office says. Retailers doing less than $10,000 through affiliate sales are exempt from the law, he adds.

The New York action could lead to similar legislative efforts in other states pressed for finding ways to generate revenue, says Daniel Schibley, a tax analyst for CCH Inc., a unit of Wolters Kluwer that publishes tax and legal software and publications. “A lot of states will look at this new idea of collecting tax on remote sales,” he says.

http://www.internetretailer.com/article.asp?id=26250

[Rhia7]

Reuters has an excellent article:
New York "Amazon Tax" Presents Policy and Legal Problems

There seems to be a push to overrule Quill Corp. v. North Dakota
Important Tax Cases: Quill Corp. v. North Dakota and the Physical Presence Rule for Sales Tax Collection

This is not fair:

"Brick-and-mortar retailers will have to keep track of just one tax law at a time, while online retailers will have to keep up with 7,400,"

http://www.reuters.com/article/blogB...g03xWUXstkq1JR

Read this:
http://www.reuters.com/article/blogB...g03xWUXstkq1JR

[Mr. Sal]

Originally Posted by Adam Ward

Amazon sues NY

http://www.nysun.com/news/amazoncom-sues-stop-ny-tax

"The dispute, which is before a state court in Manhattan, is heading toward a constitutional showdown that will center on whether New York State is hindering interstate commerce by imposing on out-of-state companies, such as Amazon.com, the burden of serving as a tax collector for New York."

So I guess my buddy Franky was right!

Oh sole mio, c'est la vie, but... It's Up To You!

[Leader]

Originally Posted by MichaelColey

I love it, but I doubt any merchant would be gutsy enough to do that.

It's nothing to do with guts or lack thereof. It's purely financial. NY State (especially the NYC and its burbs) is a BIG buying area, second only to California. A merchant who willingly stops shipping there would be cutting its own nose off to spite its face.

The general populace will need some other motivation. Personally, I still think the basic desire to avoid tax is a motivator for many. Especially if already-existing taxes start being raised, too, as Beachy mentioned.

Originally Posted by Beachy

We will be moving from Maryland, who just raised a LOT of taxes to a state with zero sales tax. I will also be incorporating my business in Delaware in January of 2009. I'm sure Maryland will be jumping on any NY-tax-style bandwagon, so I will be in a more fortunate situation, being a Delaware aff rather than a Maryland aff. At least I hope so... (Plus, there are other real tax advantages.)

How are the property taxes? In FL, there is no state-level income tax (if my information is correct), but the property is taxed out the wazoo compared to MI, so it's more like they're switching the name of the agency listed on the tax bill.

[PetsWarehouse.com]

I found a link to the complaint

Interesting read, Amazon relies on a '92 case Quill v N. Dakota,
504 U.S. 298, the Supreme Court held in Quills favor, no tax, but went on to state at that time
"Accordingly, Congress is now free to decide whether, when, and to what extent the States may burden interstate mail-order concerns with a duty to collect use taxes."

Quill only mailed catalogs at that time.

If the issue get to Congress what ever happens will be nationwide, if there is a tax how can an Internet company manage 6200 different tax venues and 4000 use tax districts?

Every shopping cart will have to be rewritten


NY has not yet filed its answer to the complaint we are a long ways off from a Court ruling, I would expect many amici curiae briefs coming in from other large retailers in support of Amazon and states for & against.


.

[Bill]

Originally Posted by Leader

......How are the property taxes? In FL, there is no state-level income tax (if my information is correct), but the property is taxed out the wazoo compared to MI, so it's more like they're switching the name of the agency listed on the tax bill.

Not meaning to derail the thread, but to answer your question, Leader: Our (current) primary home in Baltimore, our second home at the beach, also Maryland, and the house being built in Delaware are all within about 20K of value. The property taxes are: Baltimore, $6200; Ocean City, $3200; Delaware, $700. Delaware does have an income tax, but it is less than Maryland and for retired folks, the first $25K is exempt. But we are also looking a the corporation setup and the fact that there is no sales tax on anything purchased.

[smallaff]

We just received our first removal from program. Merchant has decided to "remove all NY affiliates .....may revisit if the law is struck down." Wonder how many yet to come!

[Kevin]

Did you really? Who was it?

[Daniel M. Clark]

It wouldn't surprise me if a few merchants reacted like the online poker sites did last year and just start kicking people out until the dust settles... not a happy thought.

[PetsWarehouse.com]

It begins

Dear xx:

Due to the new online tax law in New York State we have decided to remove all New York state affiliates until this issue is clarified. We regret having to do this and hope that after further clarification or the law being struck down, that we will revisit this issue and hopefully be able to resume the productive business relationships we have enjoyed with you.

We appreciate your understanding in this matter and look forward to working with you again in the future.

Regards,
The Drs. Foster and Smith Affiliate Team


-----------

Note to our NY based affiliates, this has no effect on our program being based in NY

[smallaff]

The merchant is LiveAquaria, a new merchant to us and not a big loss as far as sales. We did receive an email from one of our biggest merchants (really don't want to name them) last week asking us to verify what state we are based in. They were very upfront stating they were trying to understand the NY law themselves. So far they have not terminated us but fear the worst.

[loxly]

I am going to admit that I have not read the law yet, I plan to this week of course, but for those of you that have already investigated, are merchants only required to collect the state tax or do we have to collect for each county? As a former New York State business I had to collect for every county, plus there is the New York City tax issue. Were any of those addressed?