I have been thinking and reading about the impending NY state sales tax that will be imposed on affiliates starting June 1, 2008 and have to say it makes me upset that more has not been done to stop this issue. Sam Harrelson of Cost Per News, Shawn Collins of Affiliate Tip, Heather Paulson and Todd Crawford on Revenews, CNET, NY Times all have made excellent comments on this issue as well and if we do nothing it will be a step back for the industry. I have outlined some key points below (including a potential plan and NY representative links) that would need to be discussed so please feel free to comment.
To give a small background, NY state has decided that if affiliates are doing business in the state of NY and acting as physical store that are reselling / referring goods for online merchants even though the merchant has no physical address or location in the state of NY. The state estimates the overall tax will generate $50 million this fiscal year and $73 million in 2009-2010. The internet retailers are now being notified of the new NY sales tax and deciding whether to collect taxes, join Amazon in the legal battle or just not ship to NY period. The affiliate managers are looking at Overstock’s decision to drop 3,400 affiliates and deciding whether or not to drop NY based affiliates and affiliates in general are wondering if they should bother promoting online merchants.
Overstock Drops Affiliates:
Overstock, for its part, is opting to cut off its 3,400 affiliates in New York, telling the Times that it couldn’t afford to deal with collecting sales taxes in the state, although it, like Amazon, believes the new policy is unconstitutional. An e-mail from Overstock’s affiliate program manager republished by the blog Affiliate Tip characterized the situation as “temporary.”
This causes a problem for:
- Online Merchants – they will incur costs of tracking, re-engineering e-commerce systems and ultimately the potential of lost revenue from a major state.
- Affiliate Networks – they will loose revenue from the profitable revenue sharing agreements they have with merchants as they stand to not only loose affiliates but revenue.
- Affiliates – many affiliates are small businesses that rely on the revenue stream from affiliate programs to offset the rising cost of goods and services in America.
- Consumers in NY – with void of affiliates they could potentially pay more for products on the internet.
What needs to be done:
- Affiliate Marketing Industry Association needs to be formed
- A campaign to get online merchants to join Amazon in the legal fight in NY
- Pressure on NY representatives who oversee sales taxation
- Enrollment of industry groups and associations to back the measure – Manhattan Chamber of Commerce
- Publicity from bloggers, Newspapers, television and more
- Funding for effort with help of online merchants, Affiliate Networks
- Strategy for Affiliates – in case the effort is not stopped and ways an affiliate can still prosper in NY
The good news is that people are talking but this needs to go to a much higher level to catch the attention of NY residents, online merchants, affiliate networks and the representatives who can influence taxation in the state of NY.
Ready to get started?
Michael Vorel
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