Affiliate Marketing Community Tax Issue Update

The NY affiliate tax issue has ignited several issues and initiatives. It now seems that Texas might be following along with CA. The issue has caused debate over the need for affiliate marketing association or to work with established groups such as the IAB.

We participated in the IAB public policy meeting this week on the new Can-Spam legislation. The IAB has been very focused on the privacy issues legislation and it effect on our interactive markets. In the last segment of the meeting MediaTrust’s CMO Trip Foster and ValueClick opened the affiliate tax discussion. The public policy team made several things very clear that don’t surprise me at all. The law is not very well thought out and applies a traditional retail tax model to the internet e-commerce model. It treats NY affiliates as physical store fronts, and physical store fronts have very clear limitations and physical boundaries. Interactive store fronts have no borders or boundaries. Traffic can come in from anywhere in the world at anytime. This is internet 101 NY state! You need to look at this thru a different lens and apply different model. Each state has different taxes on goods. There are no current mechanisms or the infrastructure in place to be able to handle every global transaction across every state.

So now we have a knee jerk reaction created by a knee jerk law. Merchants are either fighting this like Amazon, or walking away from 3,400 affiliates like Overstock. Others are following each of the 2 paths creating extremely alarming reactive behavior. Not Good. Do the math. If this spreads across other states. mean while we are in a economy that needs stimulation, jobs and productivity. This law is counter productive to the current economy. Affiliate marketers make a living from online marketing. These are real small businesses not hobbies. Many have affiliates have started to help counter the impact the economic contraction on their lives. Affiliate or the work at home model is an important part of the emerging long tail economy. This is a meaningful trend. With significant numbers being generated around the 8 billion mark and growing. This is a meaningful part of large companies down thru the value chain to the SMB’s and service providers that have been created thru the new interactive economy.

It is very important that the affiliate marketing community come together and have a voice. State legislation needs to take the time to work with the community, merchants, affiliate networks and affiliates to create a law that is very well thought out and applies to E-commerce. Not traditional retail. Sites and IP addresses can move. Physical stores cannot. NY state shoppers also transact on NY state affiliates sites when they are out on NY state. What is the ripple effect and impact on the interactive marketing community and the interactive economy in relationship to the bigger economic picture? Proper methodical legislation is needed that looks at the entire puzzle. Not one section of the puzzle, and this puzzle has many many pieces in all sizes, shapes and colors. It is NOT black and white.

We will be working with our community and participating in further IAB public policy around this issue and will post as the legislation moves along. We strongly encourage everyone to participate in raising awareness by being vocal and asking questions thru the forums, blogs, service providers or submitting a petition to affiliatepetition@gmail.com . Everyones voice counts no matter how big or small.

Here are some helpful links:

affiliatepetition@gmail.com is an anonymous point of contact to send in your thoughts or petition

Full text of law located here

5 Star Affiliate Program’s Linda Buquet proactive call to action commentary and updates (a must read)

Kevin Webster of the 72 Kilowatts blog started a post on ABestWeb, “Merchants who ALREADY collect New York Sales Tax.”

ABestWeb dedicated area to legal issues for New York affiliate marketers

ABW of merchants who have dropped New York affiliates.

ShareAsales Brian Littleton’s network position and thoughts commentary

Revenew’s Heather Paulson’s “Interview With Members of the NY State Tax Dept”

Shaun Collin’s Affiliate Blog commentary