New York’s Spitzer Moves to Leverage Affiliates as Tax Nexus

As reported in the New York Sun today, New York’s Governor Spitzer is looking to charge online merchants sales tax for orders sent to New York.

When it comes to charging sales tax, e-retailers have been held to the same old standard that the U.S. Supreme Court set for mail-order vendors: The seller only needs to collect the tax on purchases in states where the vendor has a physical presence, such as a storefront or salesman.

New York State is saying that affiliates are salespeople, thus nexus.

I recall that Spitzer made headlines a few years ago when he sued adware vendors. My guess is that this made people on his team aware of affiliate marketing and somehow the idea of affiliates as nexus percolated through from there.

I think this idea is an absurd money grab, apparently prompted by a shortfall in the state budget. By this logic, one might also consider an ad agency or network located in New York a “virtual salesman”, or even a server or browser, really.

My immediate concern is a harmful effect this may have on our industry and particularly affiliate-related companies based in New York, including LinkShare.

Shawn Collins has more at Affiliate Tip.

UPDATE: Spitzer has backed down: http://cityroom.blogs.nytimes.com/2007/11/14/a-spitzer-reversal-on-taxes-too/. (Hat tip to Shawn Collins.)

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