Affiliate Marketing Stealth Tax?

There have been many posts recently regarding the New York State Department of taxation’s impending regulation to impose an out of State sales tax in respect of online companies having affiliates residing in New York. Effectively an online retailer would have to collect sales tax in respect of products sold online to New Yorkers, IF (and this is the crux) that online retailer has a physical presence in New York State.

Ok, a bit of a bitch if you’re a New York Online trader, or if you’re out of state but have agents or offices within New York, then you’ve got until June 1st 2008 to declare your interests to the New York taxation department. (new Yorkers already have to declare out of state purchases when filing tax returns).

So no big deal to the rest of us (sorry New Yorkers you’re on your own) , BUT IS IT? - Well here’s the absolute lunacy of it all - YES it will affect us - well EVERYONE who sells products online and has an affiliate program in operation!

IT WILL if the NY taxation department get their way, because they are declaring that having an online affiliate residing in New York is exactly the same as having and angent or employee living there! and therefore the taxation rules will apply - Is this abosolute bollocks or what?

Online giant Amazon.com are not taking it lightly and are currently suing the NY Taxation department; “We are challenging the constitutionality of the recently enacted legislation in New York,” Amazon spokeswoman Patricia Smith said. Officials estimated the state would gain about $50 million by requiring Internet giants such as Amazon.com to collect state sales tax.

Imagine if idiocy prevails - how many other states (and countries) will get in on the act - some nice extra revenue there for the taking! - sure it would probably cost in excess of the recoverable revenue to set up a department to police and collect the taxes, but hey that’s never been an issue before has it!

Watch out Google you’re next!

So what about Adwords and Adsense (and any other PPC program), will they be immune? - If the same argument stands then the situation is exactly the same. Yes, utter crap I know, but its exactly the same. If you are an online retailer and you choose to have your ads shown across the Google network, then there is every likelyhood that one of you’re ads will be displayed on a website operated by a New Yorker - So you now have an agent (affiliate) residing in New York and you must now collect sales tax from ANY products bought by New Yorkers! (maybe there’s an option in adwords to turn off New York State).

Seriously people, this is something that affects us all as internet operatives - its bureaucratic greed at the highest level. I doubt it will ever come to anything and I’m sure amazon will give them the beating that they deserve, but its worth keeping a watchful eye on events..