Forum Moderators: buckworks
[tax.state.ny.us...]
The term vendor includes persons who solicit business within the state through employees, independent contractors, agents or other representatives and, by reason thereof, make sales to persons within the state of tangible personal property or services that are subject to salestax. Accordingly, if a business located outside New York State solicits sales of taxable tangible personal property or services through employees, salespersons, independent contractors, agents, or other representatives located in New York State, the business must register as a vendor and obtain a Certificate of Authority for New York State sales tax purposes. (See Tax Law Section 1101(b)(8) and Sales and Use Tax Regulations Section 526.10(a)(3).)
How does this impact ecommerce sites?
Also, an e-commerce retailer that uses persons to act as its representatives in the state to solicit sales or to make and maintain a market in return for commissions, referral fees or other types of compensation is considered to be soliciting business within this state through the use of independent contractors or representatives. Therefore, the e-commerce retailer must register as a vendor for New York State and local sales tax purposes.
If I'm reading this correctly, just having affiliates in New York means you're technically a New York Vendor.
Don't know how they plan to track it or enforce it but I'm sure we'll find out soon.
How will this impact your affiliate programs?
Will you drop affiliates in New York?
BIGGEST NEWS of the week - I just broke this story yesterday and this could help us
even more than the Amazon law suit.
Overstock Files Lawsuit with Supreme Court to Fight New York Tax Law.
"The complaint filed in the New York Supreme Court calls upon the court to issue an injunction and to declare the law unconstitutional.” Direct link to the Press Release:
Overstock.com Challenges Constitutionality of New York’s Internet Tax
http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-newsArticle&ID=1152267
Other NY Tax news in a nutshell:
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LOTS of merchants have terminated NY affiliates. MANY just sent affiliates notice yesterday the 30Th, saying they will terminated the 31st. NO warning! Many NY Affiliates are scrambling to pull links and replace merchants.
Quite a few are ammending their TOS thinking it will protect them. I now think that the DMA advice may be wrong and merchants still do not understand the TBS. Understandable since it's so poorly written that even attorneys have differing viewpoints on what it means.
BUT SOME VERY BIG COMPANIES have put out public notice that they are keeping affiliates and avoiding the law by changing their TOS. I would not be surprised at all if NY went after one of the these companies for back taxes to make a statement and scare other merchants into reporting.
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Serious efforts are underway to start and affiliate marketing assoc. It was discussed on last Thursday's WebmasterRadio show. We know it's too late to help with the NY issue but could help with other industry problems or with other state tax problems that could follow NY's lead in the future.
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We are doing a panel discussion about the tax problem problem on WebmasterRadio, Thursday at 3EST. We should have new information and clarification to report that the NY tax officials we have been talking to said they would try to get us in time for the show.
[edited by: lorax at 12:38 pm (utc) on June 2, 2008]
[edit reason] delinked [/edit]
Shouldn't all US-based merchants pay sales tax on their profit from the sale, regardless of the geographical location of the sale, the affiliate, or the customer? Geo-location doesn't matter, does it? Surely only the country where the merchant is registered matters?
I know, I know, I probably don't get it because my basic understanding of a country is a unitary system where all taxes go straight to central government and I don't really comprehend how a proper federalist country works.
Shouldn't all US-based merchants pay sales tax on their profit from the sale, regardless of the geographical location of the sale, the affiliate, or the customer? Geo-location doesn't matter, does it? Surely only the country where the merchant is registered matters?
Sales taxes aren't based on the profits of a sale. A sales tax is a state & local tax that retailers are forced to collect and remit.
There are no Federal sales taxes on consumer goods and services.
Sales taxes are levied by state and local governments. They are collected by merchants and remitted periodically to responsible government agencies.
The Constitution specifically gives the Federal government the power to regulate inter-state commerce. Over time, our courts have interpreted that to basically mean that one state may not impose a tax on a resident of another state, as that would be an impediment to the smooth flow of inter-state commerce.
Obviously, this precedent was decided long before the Internet came to light and it's likely that in the next few years, legislation will be passed to make it easier for cross-state taxation.
Note that states that collect sales taxes always have corollary "use taxes" which say that residents must pay sales tax whether or not it was charged by their vendor. Technically speaking, you are supposed to keep track of items you purchased without paying tax on and remit it yourself each year. Almost no one does this, which is why states are going after the must-easier-to-find retailers.
Further complicating matters, the courts have ruled that if you have a "nexus" in a state, the state has the right to force you to collect and remit sales taxes on all sales in that state. The trouble is, the definition of "nexus" isn't strictly defined.
New York is claiming that having web affiliates within their borders gives "nexus" thereby requiring Amazon.com to collect sales taxes. The outcome of the case and its appeals will almost certainly help define precedent in this area.
The definition of "nexus" is critical. For example, I have no affiliates at all. However, my products are listed on Amazon.com. If Amazon.com has a nexus in New York, do I as well?
I don't have any agents in Colorado, but I do host my web servers via a third party company there. Does that mean I've got a nexus in Colorado?
There will almost certainly be more court cases in the coming years trying to figure all this stuff out.
A sales tax is a state & local tax that retailers are forced to collect and remit.
Ah, okay, so, as I suspected, the sales tax under discussion is a product of federalism. (I didn't realise that at first, which is why it made no sense to me what exactly was going on). We only have one local tax in the UK and it's based on the size of your house and which neighbourhood it's in. All our sales tax (VAT) is collected by merchants and handed over to central government.
Okay, apologies for the interruption and thanks for the enlightenment - carry on!
It would be nice if we didn't have to have court battles to do this. If it does come to that then it means someone (possibly one of us) could be the litmus test for a new law/decision. I sorely wish that our judicial system would invite the averagle ecommerce shop owner (not the Bill Gates') to the table and have a chat with them about what it's like, what you're dealing with, how it works, etc... I think a series of these chats would prove to be very enlightening for them and possibly help them see the pitfalls of some of the various interstate commerce taxes that have been proposed.
It would be nice if we didn't have to have court battles to do this. If it does come to that then it means someone (possibly one of us) could be the litmus test for a new law/decision. I sorely wish that our judicial system would invite the averagle ecommerce shop owner (not the Bill Gates') to the table and have a chat with them about what it's like, what you're dealing with, how it works, etc... I think a series of these chats would prove to be very enlightening for them and possibly help them see the pitfalls of some of the various interstate commerce taxes that have been proposed.
What you are describing is what legislators are supposed to do - not judges. The courts are supposed to decide how the law *does* work, not how it *should* work.
Lobbyists spend a lot of money trying to influence legislators to get favorable laws passed. Do you really want their money and corrupting influence channeled into an unelected body?
The hope is that by making it easy to collect and remit taxes, they can convince Congress to pass legislation in their favor and that the courts won't overturn it.
Lobbyists are lined up on both sides of the issue. The National Retail Federation (represents large chains, which typically have a nexus in most states and have to charge sales tax on their Internet sales) is pro-tax. The Direct Marketing Association (typically represents catalog merchants, which do not usually have nexus) is anti-tax.
It's probably inevitable that SSTP-friendly legislation will be passed in Congress. Hopefully, there will some minimum revenue thresholds in place to prevent micro-ecommerce sites from having to deal with it, but who knows.
