Overstock.com 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.
The backlash comes in response to New York’s misguided attempt to collect taxes from online shoppers. Up until now, online retailers have only had to collect sales tax in states in which they have a physical presence. This meant that Overstock, which only has a tax nexus in Utah, wouldn’t have to collect tax from customers in the rest of the country – it was left up to consumers to declare the goods as out-of-state purchases (which few people do).
New York has decided it wants its cut, and 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.
Rather than collect these taxes, Overstock has decided to cut New York affiliates entirely, removing their “physical presence” from the state. The move sends a message that will likely be echoed by other retailers: If you want to be an affiliate, move out of New York.
Overstock isn’t the first retailer to respond to the law – Amazon has filed suit against the state in an attempt to get it overturned.
You can read more details at Shawn Collins’ Affiliate Marketing Blog.