May
22

New Law Makes Many Web Sites New York Vendors

We knew the day would come when various states would try to grab some of that tax revenue lost to out of state ecommerce sites and New York has fired the first shot.

http://www.tax.state.ny.us/pdf/memos/sales/m08_3s.pdf

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? It all depends on the merchant/retailer if they don’t want to pay for tax fees they will drop you as an affiliate (in case you are from New York).

You can take this one step further. The law is very vague here and is being challenged by Amazon. Google, Microsoft and even Yahoo has employees working in New York State (Keep that in Mind).

So, if a New York State Publisher is running adsense for an out of state ecom site, does that mean that the New York publisher is considered an affiliate to an out of state ecom site? Well, that is not quite clear yet. It is a gray area.

Here is a link to the amazon lawsuit that they filed against New York State:

http://www.newsday.com/news/local/state/ny-stamaz035672022may03,0,1146358.story