Sam Harrelson



Sam Harrelson

Linkshare Teams with the DMA on NY Affiliate Tax

Affiliate networks are beginning to get more active (or at least more vocal) on the New York state affiliate tax issue.

CJ has weighed in with a general call for due diligence, ShareASale has been more proactive and involved with the issue both on their blog and in the ABW forum. Then during the GeekCast podcast yesterday, Shawn Collins discussed Linkshare’s partnership with the DMA over the issue.

Here is the email Linkshare is sending out to publishers today:

LinkShare has issued the following invitation to a teleconference on the New York State sales tax change and affiliate marketing:

On April 9, 2008, New York State passed a law mandating that any retailer that (1) meets a certain sales volume from sales to New York customers and (2) has an affiliate program with New York based publishers that refer customers to the retailer and are paid on a commission basis must charge and collect New York sales tax on all sales shipped to New York.

We have been actively working with, and providing support to, the Direct Marketing Association (DMA) to clarify this law. The Direct Marketing Association is the leading global trade association for businesses that use direct marketing tools and techniques. LinkShare is proud to be their partner. As this issue continues to develop, we are committed to making available the insights of authoritative partners like the DMA to help inform and guide you.

To this end, we are pleased to invite you to be LinkShare’s guest for the DMA’s conference call on this issue, featuring DMA Tax Counsel George Isaacson this Thursday, May 22, 11AM to 12Noon Eastern. He will provide an overview of the bill and the DMA’s interpretation of it. There will also be an opportunity for Q&A.

To join the call (Thursday, May 22, 11AM to 12Noon Eastern), email government@the-dma.org to receive personalized dial in information. Please let them know you are a member of the LinkShare Network.

Of course, while the DMA provides an authoritative source for information, since every business has a unique situation, we urge all our partners to seek out individual independent tax and legal advice. The New York Department of Taxation and Revenue‘s Technical Service Bulletin (TSB) and DMA’s analysis of it are available on our site at http://www.linkshare.com/advertisers/ny_state_tax/

For details, please contact:

Mark Kirschner
LinkShare
646-943-8359
mkirschner@linkshare.com

Dan Dent
Blanc & Otus Public Relations for LinkShare
617.451.7351
ddent@blancandotus.com

I’ll be on the call (from a hammock on Hilton Head Island, SC while my monkey butler brings me drinks…) and will share my thoughts here tomorrow afternoon.




Thoughts on New York Affiliates Situation: Industry Org Needed?

Michael Vorel posted an interesting tweet this morning:

I am concerned many NY affiliates will loose interest in affiliate marketing, solutions?

which was followed up with a tweet from Shawn Collins:

@vastplanet I think it could help to publicize Amazon’s battle and try to bring grassroots blog pressure on NY to get more mainstream media

The back and forth refers to the developing situation surrounding recent legislation in New York state that seeks to collect taxes on online revenue generation and immediately effects large merchants as well as the NY state affiliates.

There was a question as to whether Amazon would drop NY state affiliates, but it looks like the first large merchant to take that step is Overstock.

Shawn Collins covered it first and best at AffiliateTip Blog:

Today the Small Business Blog reports that Overstock.com has issued a notice to all New York state affiliates that they are being dropped from the Overstock Affiliate Program, effective May 20, 2008.

As the day went on, more bloggers and discussions started appearing about Overstock’s actions. Even Saul Hansell of the NY Times is following the developments with an in-depth piece and link back to Shawn’s piece:

There were two predictable fallouts from New York State’s move to force online companies to collect state sales tax: There would be a lawsuit. And some online merchants would cut off their affiliates in the state.

Then, over on ReveNews Heather Paulson covered the situation and got a very precise comment from Todd Crawford:

I am very concerned that NY sees affiliate marketing differently than other forms of online advertising like CPM and CPC. I do not understand the logic they are using that affiliate marketers create nexus for advertisers allowing them to charge sales tax. If this is not overturned, I would expect NY to extend the nexus to any online advertising – including CPC and CPM. Idiots!

As Todd and others have pointed out, this is a very short term play from NY state and will eventually cost them revenue in terms of sales tax and income tax generation from merchants and affiliates. However, states are cash strapped (I won’t get too political, but let’s just say the current administration’s fiscal practices haven’t exactly helped states deal with rising health care and education costs) and looking for ways to get into the black during an important election year when the turnout is going to be exceptionally high.

Will more states follow NY? Yes. It’s almost a certainty if NY is successful at collecting taxes from large companies such as Amazon (which it looks like will be the case judging from the NY Times piece). Does this mean affiliate marketers or merchants will suffer and eliminate affiliates working in those states? Perhaps, but I don’t think that’s a necessary certainty.

Instead of making the case that affiliates are being treated unfairly, I think our best bet as an industry is to make the case to state governments that this is an economically short minded tactic. Robbing Peter to pay Paul never works and the states will loose more long term revenue in the form of sales and income taxes than they will gain by a tax system that will surely have more holes than a sieve.

I fear it will be the affiliate marketers themselves and not the merchants who have to make this case. The merchants seem willing to either pay the tax or to stop working with NY state (and eventually others) affiliates instead of making the case against such a tax scheme.

Industry organization anyone?