Thursday, May 15, 2008

Forget it, we're leaving

State governments, often strapped for funds, are constantly thinking of creative ways to tax rich people (income taxes), poor people (sales and sin taxes), businesses (taxes, fees, etc.), or whoever they can tax.

When the government sets its sights on busineses, the usual business reaction is, "You're making it economically impossible for us to do business here, and we may have to move." To which the state usually responds that the businesses are lying.

Well, guess what? (TechCrunch) has terminated its contracts with affiliates based in New York in response to the state’s recently enacted “Amazon Tax”. The drastic move is likely the first of many, as online retailers display their objection to the new law....

New York has...enacted a law that treats affiliates of online stores as extensions of the store itself. Because Overstock has a number of affiliates in New York, it is considered (through some very creative logic) to be physically in the state too, which means that it has to collect taxes from all NY customers.

Business Know How puts things into dollars and cents:

I don't know how many New York businesses made a significant amount of their business from Overstock, but if there are any, they now can forget that source of income. And, New York state can forget about income tax they would have collected on the business owners' earnings.

But this is just a New York issue, isn't it? Maybe not:

Other states are watching the New York situation closely. The state's large population accounts for a big chunk of Web shopping, which is forecasted to reach $200 billion this year.

California too is mulling legislation that would broaden online sales tax requirements. The aim there is to define the significant business connections a company must have within a state with its online customers before the state can legally collect sales tax: for example, brick-and-mortar stores and distribution centers in the state -- or relationships with affiliates and third-party vendors in the state that profit from the Internet transactions.

This isn't necessarily a black and white issue, since the brick and mortar stores within California and New York would love to reduce the competition from online stores.

We'll see what happens.

Also see Affiliate Programs, SearchNewz, and Affiliate Marketing Blog.

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