6 Comments

New Business Opportunity: Outsourced Affiliate Locations

May 15, 2008
by

With the announcement that the state of New York will be collecting sales tax from affiliates, and the termination of New York based affiliates, we have an opening for a new business model. We already have outsourced affiliate program managers, and merchants can choose any number of solutions to run the technical side of the program, and affiliates can sign up for other 3rd party enhancements, so why not outsource your location?

All New York based affiliates could sign up with a company (in Delaware or Nevada perhaps) who could do a quickie incorporation and set up a mailing address (PO Box) for them in the new state. Then the affiliate edits their payment information to the new location. The outsourced manager could charge a small fee to cover the incorporation and a monthly fee to forward mail and checks (or deposit them) for those who are not paid electronically. You may need to change your address on your bank statements and other bills to the PO Box.

Tax that New York.

Filed under: Affiliate Marketing + Internet Strategy + Legal Issues + Online Marketing
  • http://www.imwave.com Adam Viener

    What I want to know is that since Linkshare is based in NY, does that automatically put all of their clients at risk for this tax?

  • http://schaafco.com Brook Schaaf

    I think you’ll see exactly this start to happen. This entire tracking will be based on mailing address, right? Most affiliates probably wouldn’t need to go to the trouble to set up a business entity in a different state.

    This is already having negative effects with NY affiliates being removed from programs.

  • http://www.shopping-bargains.com/ Mike Allen

    The (former) NY governor went after affiliates (illegally IMHO) in a flurry of PR and venom as was his style it seems. Some other governor would be wise to put out the welcome mat for affiliates to relocate or outsource within his or her state.

    Think of the economic development opportunities . . . attracting an environmentally-friendly, high-tech industry with high income potential (think state income tax collections here) that is attractive to a wide range of people, many of whom work from home. Who wouldn't want more taxable income earners like this in their state? Thinking about it like this, a physical address alone could be worth thousands to the new host state . . .

  • http://www.rhinofish.com Pat Grady

    Mike, you're right, it is an opportunity.

    Being a Florida resident, I view retirees as coming here, spending their money and not driving all that much, not putting kids in school, not getting in trouble with the law or the courts – basically, they are ideal as residents, tax base with low demand for resources. We love our blue hairs down here in Fla, one key reason we have no state income tax (other being the tourists come and we tax them to tears, again, no schools and few services – other than highway between airport and disney, where we have 6 toll booths!).

    In this same light, to the state bean counters, a work-at-home affiliate marketer is a good catch. Biz license, sales tax paying resident with moola, not using roads like other commuters, energy use is very low compared to other workers. To boot, the higher concentration of home workers a community has, the lower that neighborhood's crime rates are, so the less patrolling these streets need. Asynchronicity of work patterns also relieve bottleneck congestion in power grid, traffic and other utilities and state provided services.

    NY doesn't understand the mobility of people in our vocation… getting them to sit in your state, to your benefit, means NOT clubbing them… Tax-hungry politicos will "earn" themselves a net loss in revenue with their current approach.

  • http://www.cumbrowski.com/ Carsten Cumbrowski

    I am usually not for lawsuits that quickly, but in this case I think a class action lawsuit against the state of New York might be the way to go.

    The state does obviously not include everybody with the same or very similar legal status and business relationship with a NY based company in this law, which would be against some laws that are federal, not to mention constitutional.

    Its sad to see that advertisers are "chicken" out and not take a stance together with their affiliates. Especially from an advertiser like Overstock would I have expected that they don't just jump the fence and leave their affiliates behind. They should at least make an effort to support their affiliates, by providing access to high quality legal advice for example, if the affiliates should decide to take legal actions against this stupid (and in my personal opinion, illegal) law.

    I am not a lawyer, but if a law feels completely wrong and illegal, it often is just that. This can change, if some ill attempts are being made to fight the laws and are being used as reference for legal cases that follow.

    That's my 2 cents.

  • http://www.businessknowhow.com Janet Attard

    Brad, I think NY may already have addressed the third-party angle – basically saying, if I read things right, that the outsourced affiliate deal wouldn't prevent a company with NY affiliates from being liable for NY taxes. This is from a memo on NY state's website:

    "For purposes of the presumption described above, a seller is also considered to have met

    the condition of having an agreement with a New York State resident where the seller enters into

    an agreement with a third party under which the third party, in turn, enters into an agreement

    with the New York resident to act as the seller’s representative.

    To read the entire memo see http://www.tax.state.ny.us/pdf/memos/sales/m08_3s…

    Also, if I'm reading that memo correctly, apparently ads on website might not cause a sales tax relationship, but the same affiliate ad in a newsletter apparently would.