Affilate Tax Law
Affiliates tax law, aka E-Fairness Legislation, has become the battlefront between the brick and mortar businesses and online retailers as both struggles to survive the current economic crisis. Independent retailers are lamenting the current phenomenon wherein an unfair disadvantage exists as many out-of-state businesses reap the benefits of a large consumer base, while simultaneously putting local stores out of business. The online retailers who are opposing affiliate tax bill contend that this legislation could place the state's technology companies at a severe competitive disadvantage by spurring out-of-state companies to use online marketplace and web service companies in other states. Their main argument is that the state can be in the losing end as many of these online retailers would opt out of the state's affiliates and move out to friendly states... thereby diminishing sales tax revenue.
It is reported that New York State's Internet Sales Tax provision, which went into effect on June 1, 2008, has already recouped $46 million in sales tax revenue from the 30-plus vendors that registered to collect and remit sales tax. This recent development has fortified those supporting the E-fairness legislation.
Leading online merchants - Amazon.com and Overstock.com - challenged the provision in New York State Supreme Court in Manhattan. However, in January 2009, a judge dismissed the lawsuit filed by Amazon.com. A similar lawsuit by Overstock was also dismissed. Both Overstock.com and Amazon.com have filed notices of appeal.
Let us continue to monitor the development of this proposed legislation as this will certainly affect how we conduct our business online especially in the affiliate industry. Feel free to add to this blog on the development that you are aware of.
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