[Kevin]

I think this document goes a long way towards supporting what we believedto be the favorable reading of the law for affiliates... though more work is needed.

http://www.tax.state.ny.us/pdf/memos/sales/m08_3_1s.pdf

[Haiko de Poel, Jr.]

Additional Information on How Sellers May Rebut the New Presumption
Applicable to the Definition of Sales Tax Vendor as Described in
TSB-M-08(3)S

http://www.tax.state.ny.us/pdf/memos/sales/m08_3_1s.pdf

[sjangro]

Haiko, that's the same doc that kevin posted. Did you have a different one?

[Haiko de Poel, Jr.]

Right, I merged the threads, our posts were two minutes apart.

[Kevin]

Was just a thread merge, Mr. jangro. Haiko and I hit submit simultaneously, I think.

[sjangro]

aha, sorry. thought it was a mis-paste. gracias.

[loxly]

This is more BS that requires the networks to disclose personal information about their affiliates to merchants. According to this memo, a merchant has to mail or email, all their NYS affiliates and have them sign a paper that they are not promoting the merchant in the excluded manner.

Problems with this:
1. The affiliate is no longer protected by the network's privacy policy. NYS is requiring networks to disclose affiliate information to merchants, and is requiring affiliates to tell merchants who they are and what their promotional methods are.

hummmm... transparency, where have we heard that before? And the reasons for affiliates to remain behind a networks shield are still real and valid reasons. Some people may be all "yay! It's time affiliates told us who they are." Well, I personally know merchants that are still using affiliates just to find out their methods to drive sales so that those merchants can copy the tactics. Yes people, it's real, it's not a lame excuse.

Now I am beginning to wonder who really pushed this law? Who benefits by the merchants having more information about their affiliates and the affiliates activities? Is this just the way NYS decided that it would be able to make more merchants have to comply and collect taxes for them? I wonder who put this idea as a work around into the tax department's head?

2. As a merchant I need the networks to do more work. Lots more work. They need to tell me who my NYS affiliates are, I need their email addresses, when those emails aren't delivered or responded to, I need their physical address so I can send them a letter, I need a phone number to contact them when there is no response to the email or letter. Or I need to be a bad guy and remove them. If the networks are contacting the affiliates on my behalf, I need them to report to me who has responded, who hasn't, whether my sales get me close to having nexus, if yes, we have to step up the process to get the paperwork from the affiliates to tell me if we are in compliance.

3. Networks have to change their tracking systems. Merchants need to know not just the sales that NYS affiliates made, but that those sales shipped to NYS. This is not built into ANY current tracking systems

This latest memo points out to me that New York State is desperate and is going to put an unnecessary burden on merchants, networks and affiliates whether they collect the tax or not.

[Kevin]

Couple of things still need clarifying... Least of which being:

"Or electronic equivalent". That's a broad term when juxtaposed next to "newsletter" and "coupon", and then further calls into question their definition of "distributes".

Also:

need to look into this as it relates to a merchant not having 100% response compliance from it's resident NY affiliates:

In weighing the significance of a seller’s reliance on certifications from fewer than all
its New York resident representatives, the Tax Department will apply the standards for
constitutional nexus set forth in Quill Corp. v. North Dakota, 504 U.S. 298 (1992) and
Orvis Co. v. Tax Appeals Tribunal, 86 N.Y. 2d 165, 178 (1995).

[loxly]

The thing that NYS is forgetting is that NYS affiliates are NOT NYS representatives. The sell world wide, they do NOT target NYS residents. There is a big hole in what NYS *thinks* affiliates do and what they *really* do.

NYS just wants all online merchants to cave and start collecting the sales tax. They will keep throwing paper work at merchants and networks until it is easier to just give in.

[Kevin]

Empty retail stores driving Zero NYS sales tax is what's behind this law, Lox, pure and simple. I.e. New York, and New York alone.

For now, the law is a fact.

Our merchant partners either comply if they meet the monetary conditions, or they dump us, or they open themselves up to the wrath known as a NY audit.

To me, this document is a back peddle, but it's a back peddle that makes this law MUCH more borderline Constitutional. It deflects the main focus, I feel, of the AZ/OS law suit, and worse:

Since the affiliate community at large, merchants, networks, and everyone, have done such a poor PR job since 1996, tell me what leg we might have to stand on with NY or the Supreme Court that we need our privacy in a sales relationship?

Taken out of context, it's a ridiculous statement to begin with. "But I don't want the people I represent everyday to know who I am..."

[Kevin]

The thing that NYS is forgetting is that NYS affiliates are NOT NYS representatives. The sell world wide, they do NOT target NYS residents. There is a big hole in what NYS *thinks* affiliates do and what they *really* do.

My read is that this document in part shows that they see your point.

[Brian - ShareASale]

Now they need a document to clarify the clarification.

In addition, if the resident representative is an organization such as a club
or a non-profit group, the contract or agreement must provide that the organization will maintain
on its Web site information alerting its members to the prohibition against each of the solicitation
activities described above;

My thought is.... what are they even talking about?!?

[Kevin]

Brian: If you'll recall the first TSB (which I'm sure you do), they made specific reference to ski clubs, and them leveraging their geographic sphere of influence to promote, in person or on premise, other merchants. That was one of the things that went a LONG way towards generating the presumption of nexus.

So I think they are referring to that again here, almost in the sense of MLM.

I'm also happy that "or electronic equivalent" didn't appear in that paragraph.

[mellie]

Printing out the memo now to look over. First glance seems that it only clarified a bit in that it affirms that NY affiliates don't need to be kicked out of programs but we do have to comply with restrictions. The signed affirmation seems a bit vague.

[sjangro]

I agree this is a confusing document, but what I can take from this is not encouraging to me.

It seems to me that if a person sends an email newsletter specifically promoting a product of a merchant, that puts that person in the position of being a "resident representative" "engaging in solicitation activity on behalf of the merchant".

I can't imagine an affiliate program that doesn't have at least one deal site that fits that description.

AND, if only a single affiliate in an entire merchant's affiliate program fits this description, that's it, the merchant is a Sales Tax Vendor.

of course IANAL, that's just this one layperson's interpretation.

[Rexanne]

NYS is grasping at straws.

How they presume to define and categorize affiliate marketing is presumptuous at best. Who TF do they think they are? Grrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr

A merchant has to further police their affiliates to not specifically target NYS and refrain from any marketing other than a link on a web site which is BS.

Someone somewhere needs to bop these morons on the head and send them to bed without a kiss goodnight.

[Kevin]

It seems to me that if a person sends an email newsletter specifically promoting a product of a merchant, that puts that person in the position of being a "resident representative" "engaging in solicitation activity on behalf of the merchant".

Couple of comments on this:

1.) If in fact that newsletter was sent to a New York resident, electronically or otherwise. And most affiliates won't have that information in order to prevent it.

2.) One affiliate acting as above makes you a sales tax merchant... yes and no. It obliterates the rebuttals listed in the June 30th document*, but the previous restrictions (monetary and otherwise) still apply.

*I suspect we will find that a merchant will have the ability to remove such affiliates to "save themselves", so to speak.

[Haiko de Poel, Jr.]

I think two things ...

1. I think we are interpreting this as it pertains to our business and I don't think it does, I think this clarification shows that.

2. We've got a nice size legal fund already ... can't we through this at a lawyer and get a response instead of perpetuating the IANAL speculations. (No offense to the IANAL crowd - I'm in there with ya also).

[Kevin]

I think you're mostly right, on both counts. And I'm moving on #2.

[Alan Hamilton]

Originally Posted by Kevin

Tell me what leg we might have to stand on with NY or the Supreme Court that we need our privacy in a sales relationship?

Excellent point Kevin. Eventually, if the anonymity concern is used as a point of contest in the higher courts, they will undoubtedly question why (in commerce) anonymity is required if the claimants are engaged in ethical business practices that serve the interest of the public. IMO, that would not be an argument point. We are better off to challenge the law on constitutional grounds, which I have to guess is what O & A are planning.

added a minute later after seeing Haiko's post...

Yes, the bottom line is to wait until legal counsel formulates some answers and then proceed from there. Patience boys and girls.