72 Kilowatts Internet Marketing

New York Internet tax takes a step back?

… or a smart step ahead?

As reported initially at 5 Star, with discussion following at Abestweb, New York seemingly took a step back, and confirmed that they look at traditional affiliate marketing as possibly being the seed to rebut having a tax nexus in New York.

However, it might be just the step back they needed in order to ensure Amazon and Overstock won’t have the entire law sued into unconstitutional oblivion. Let’s look at some statements on the new Technical Services Bulletin.

TSB-M-08(3)S, New Presumption Applicable to Definition of Sales Tax Vendor, states
that the Tax Department will deem the presumption rebutted where the seller is able to establish that the only activity of its resident representatives in New York State on behalf of the seller is placing a link on the resident representatives’ Web sites to the seller’s Web site. In addition, none of the resident representatives may engage in any solicitation activity in the state targeted at potential New York State customers on behalf of the seller.

Seemingly, this backs up the statements made in the Direct Marketing Association conference call back in late May stating that traditional affiliates, in the most sparse of circumstances, did nothing to further the presumption of nexus in New York.

Now, what exceptions are listed?

Contract condition - The contract or agreement between the seller and the resident
representative provides that the resident representative is prohibited from engaging in any
solicitation activities in New York State that refer potential customers to the seller including, but not limited to: distributing flyers, coupons, newsletters and other printed promotional materials, or electronic equivalents; verbal solicitation (e.g., in-person referrals); initiating telephone calls; and sending e-mails. 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

This part gets a bit tricky again. It appears to state that a merchant must contractually bind its New York affiliates to do NOTHING aside from simple web linking. No phone calls to New Yorkers, handing out flyers and coupons, etc. Specifically as well, no email marketing.

But then they throw that “or electronic equivalent” in there. I see now we should figure out what constitutes the electronic distribution of a coupon. My hopes would be that they mean by email, but that would then be double stated in the document. Can we not have RSS feeds of our deals available? In some cases, can we even control whether an RSS feed could be made available, through the methods used by scrapers?

Further, New York goes on to request:

Proof of compliance condition - Each resident representative must submit to the seller, on an
annual basis, a signed certification stating that the resident representative has not engaged in any prohibited solicitation activities in New York State, as described above, at any time during the previous year. In addition, if the resident representative is an organization, the annual
certification must also include a statement from the resident organization certifying that its Web site includes information directed at its members alerting them to the prohibition against the solicitation activities described above. Furthermore, the certification must contain a statement alerting the representative that the certification and any information submitted with it is subject to verification and audit by the Tax Department.

This may be done electronically, it goes on to say, so it might even be able to be done at the network level, if your concern is privacy.

Another hoop for merchants to jump through to hang on to their valuable New York affiliates, if in fact, we can remain as viable with the restrictions being placed on us. And, if in fact, some of the merchants that dropped us go on to re-instate NY affiliates.

Thoughts?