72 Kilowatts Affiliate Marketing

Overstock Sues New York over Tax Law

I have no idea how I missed this yesterday.

Thanks to Linda for being first to press.

Overstock Sues New York

Some Quick Thank Yous

As June 1st draws near, and  New York affiliates haven’t heard from a lion’s share their merchants on what will happen that day, I wanted to say thank you to a few folks that have been a tremendous assistance to me in gathering info, and helping me get additional information out to the public.  So in no particular order, thank you to Hakio de Poel, Linda Buquet, and Shawn Collins.

Thanks folks

A Framework for Discussing what the Nexus Tax Means

When I initially read Phillip Dampier’s comment on 5 Star Affiliate Program’s blog, I was concerned that he was going the way of so many by just dismissing affiliate marketing as a haven for crappy websites built to make a buck.  In some ways, I suppose that’s exactly what he was doing, but I have to admit he has a valid point.

It’s self serving for New York affiliates to simply concern themselves with loss of commissions.  It’s a VERY valid concern, but it’s true that the reputation of our industry is sullied with people who have a vague understanding of what we do, and in fact, non existent to most.

So what are we to do?  Have you been able to explain to your neighbors and friends what you do for a living as an affiliate?  Alright, maybe the really smart guy 4 doors down that works in IT, but the rest just have their eyes glaze over.

So I think New York affiliates would be better served approaching this issue just like our affiliate oblivious friends:  as consumers.

So here’s the framework (and I think it’s a good one, not simply a set of phrases and pulpit bangers):

New York has, unconstitutionally in this case, extended it’s tax reach by creating their own set of definitions of business.  They’ve done it in a nefarious fashion:  by inventing a physical connection to a virtual relationship.

Traditionally, a tax nexus has been defined by an address where commerce is done:  a sales office, a retail store, or a distribution center (although not all distribution centers, as you can see here).

Now, New York is defining “at will” referral contracts as the basis for a nexus.

Many consumers agree with merchants decisions to terminate these contracts in order to keep from paying these taxes when they buy online.  My caution to those consumers is a simple one:  If this tax effort fails to reap rewards, it will be re-worded, and extended out through another means.

In other words, don’t hurt the pawns when your issue is with the King and Queen.  Calling for merchants to dump New York affiliates is short sighted.  It will cause New York to make up another non-sensical definition of what business is so that they can beat the Constitution.

As New Yorkers, none of us will win unless the notion of unfair taxation is defeated at its core.

Unhappy Friday Reading, and a Message to New York State

Linda at 5 Star was kind enough to point this post out to me on some thoughts from a legal brain on the current state of affairs for New York (and down the road, other) affiliate marketers.

First, the message to New York from John Dozier:

So, the final message is for the State of New York: If the momentum continues, New York affiliate marketers will be shut down entirely. You should have anticipated this consequence. No, you will not increase your tax base significantly. But you have added to your unemployment rates. We need to work together to save the many New York businesses going under.

I would encourage everyone to read Dozier’s post in it’s entirety, about 10 times.  I think it speaks a lot to what we can expect in the coming weeks, months, and years.  Industries our size do not go unnoticed forever.  They are not beyond the auspices of local, state and federal agencies, be they cruising for revenue, or trying to uphold the law of the land.

Further reading into the TSB from New York should also tell affiliates that think they can lie low that their marketing practices are NOT in fact a secret, and no-one else’s business.  In fact, New York has taken a deep interest in understanding EXACTLY how you promote your website.

Friends.  The time has come.  We need an organization.  Quickly.

To hide under your bed sheets and hope “they” will all leave you alone is now ineffective.

I’m not saying it has to be the Hall of Justice for affiliate marketing.  It doesn’t need to micro examine the business practices of every affiliate.  What it does need to do is lobby, educate, inform, and publicize.

And it needs to happen 2 months ago.

If the industry needs someone to step up and work on getting this thing going full time, it’s unfortunately looking like I’ll have lots of time on my hands.  While my affiliate work won’t be done, as I have word from a MINUTE HANDFUL of merchants that they aren’t dumping NY affiliates, I think I can also spend time doing more important things.

Just putting that out there.  Certainly not saying I am the most well educated affiliate marketer this side of the Missisip, I’m just saying I’m willing.

Big Shout Out to Eastern Mountain Sports

I’d like to personally thank everyone at Eastern Mountain Sports for recognizing an opportunity, and taking advantage of it:

We would like to welcome all NY affiliates to join the Eastern Mountain Sports affiliate program on Performics. 

Eastern Mountain Sports has always been a leader in the industry, especially in the Northeast. We currently have brick and mortar stores across NY and we also collect taxes on NY sales on our website, so the new law should have no effect on our affiliates and we encourage you to join.

Read the rest of the info at Abestweb here.

That’s forward thinking.  Since EMS already has a nexus in New York based on their retail presence, they are picking up where REI.com dumped outdoors affiliates late yesterday.  This is a strong move, and is to be commended.

Further, EMS actually let it’s intentions be known.  As a NY affiliate myself, I dread the Zero Hour emails I’m going to get next week, advising me I’m being dumped.  Regardless of each merchants understanding of the new New York Tax law, they should be communicating with their New York affiliates, and very few are.

Thank you Eastern Mountain Sports.  And to Downtown ECommerce Partners, who brilliantly run their affiliate program

Nexus and Lead Fees

Was reading Heather Paulson’s piece at Revenue again this morning, and I noted this:

Aside from these important resources, there were discussions on the call that can shed some light on the law’s interpretation of who is an advertiser, and who is a publisher.

An advertisement, which is a “passive, paid message,” and exempt from this law, is differentiated by the State from the very different and very much liable, ”commission- based or success -based fee.” For example, if payment is based on clicks, or views, and no sale have to be made for payment to be received, and then it is not considered a nexus point,” say the NY experts.

If there is a success fee, or commission, then web publishers are considered “sales reps” and the definition of “nexus” has been met; then there is liability for the merchant to register, collect, and pay tax to the State if they produce over $10,000 from an affiliate(s) in the State. (See example “G” in TSB-M-08(3)S)

There was some question on the DMA call about lead fees, and whether those constituted a reward that would perhaps generate a nexus.  

If I read “success fee” correctly, then I suppose it does.

The Tax Tag

Decided to change it to “new york state internet and pay for performance tax”.  I left the term internet in there even though it’s a bit extraneous based on search terms I found in my logs.  I think it’s important that people looking for this info (opinion in my case) can find it, and it would seem that the “internet stigma” has stuck to to it for now.

Good Info for New York Affiliates

Two threads at Abestweb of particular interest to affiliates in New York:

Tax Exempt Merchants with Affiliate programs

These merchants offer goods and/or services which New York residents do not have to pay sales tax on, ere-go it’s safe for New York affiliates to promote them currently.

Merchants That Already Collect NYS Sales Tax 

These merchants already have a tax nexus in New York based on the traditional definition, and therefor shouldn’t be dropping New York affiliates because of the ill advised new law.

Please urge all merchants with programs that fall into these two categories to participate there.

Clearing the Mind

I’ve spent WAY too much time reading about the NY tax crap this week, so it was VERY refreshing to get an email from my good friends at Cinematic Titanic today, announcing I got a sneak peek at their new trailer!

For those of you that don’t know, Cinematic Titanic is the resurrection of a good portion of the cast from Mystery Science Theater 3000.  And if you don’t know what that is, God have mercy on your soul.

So if you like making fun of bad movies… watch below.

If you were a Mistie, you can pick out a few voices you recognize.  This isn’t the new trailer, it’s for their first effort.

Special note to Gov. David Patterson: I’m not being compensated for this link, so stay the hell out of Joel’s wallet.

Looking In the Mirror

Considering I just pointed out that this isn’t only an internet tax, I guess I should change my tag for the topic, which is currently NYS Internet Tax.

In truth, based on all the discussion this week, I’m not sure what to change the tag to.  Think I’ll sleep on it.