New York – Overstock.com has become the first major Internet retailer to cancel its relationship with affiliates in New York. Affiliates are Web site owners who get commissions for referring customers to an online store. They are important because New York State is requiring any company that has an affiliate in the state to collect sales taxes on its behalf. Until now, companies had to collect taxes only if they had a physical presence, such as an office or factory, in the state.
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“We believe the law is unconstitutional and won’t stand the test of the courts, but in the meantime we have been very careful to keep our footprint just in Utah,” said Jonathan Johnson, Overstock’s senior vice president for corporate affairs. “We can’t afford to have our New York affiliates up online if it subjects us to New York sales taxes.”
Mr. Johnson said Overstock has 3,400 affiliates in New York State, though not all of them are active.
The company’s goal is “showing the New York governor and legislature that this is bad for New York businesses,” Mr. Johnson said. “There are affiliates in New York who will see their business go away because of a not-so-thoughtful action by the New York State legislature.”
Meanwhile Amazon.com will not cut off New York affiliates, according to an e-mail from Patty Smith, a spokeswoman. She wrote: Nothing is changing with regard to Amazon’s relationships with Affiliates in New York state. We expect to begin collecting sales tax (as the new legislation requires) no later than June 1, 2008.
good for overstock.com. everyone should follow suit!!!!!!
Is there a way to spin off a strategic partner that deals with NY affiliates, and have only that new entity responsible under the tax law, not the primary company when the primary company ships to NY? Does it help if the new entity is not in the US, or in a state that has its own sales tax of a lower rate than NY and which does consider the sale to be only in that non-NY state?