AvantLink has a post on their blog addressing the now effective (as of June 1) New York state “affiliate tax.”
While most of the post does a good job of laying out the issue with practical examples, this part at the end of the post caught me by surprise:
New York Sales Tax, Merchants and their Affiliate Programs · AvantLink’s Affiliate Marketing Blog: “To prevent falling into the scenario of Example 2 we propose adding the following terms to your Merchant program terms:
‘New York State Affiliates may not solicit New York State residents by using flyers, newsletters, telephone calls, e-mails, PPC ads, or any other type of Internet marketing techniques besides web site advertising links.’”
That’s well and good for some affiliates who still just do banners, but I’d argue that many (if not most) affiliates doing more than $50 a month now utilize some sort of PPC or email component as a part of their campaigns or traffic generation. To amend merchant terms saying that affiliates can only use banners seems more than heavy handed and follows the same draconian logic as employed in the actual NY state law.
If you look at the “Top 10 Affiliate Programs” from last month, at least 7 (probably 9) of them rely (some heavily) on PPC and email. To lop off those channels of traffic generation within a network doesn’t solve the NY problem.
Affiliate marketing has become a much larger umbrella than just banner ad placements on static html websites. In addressing this issue, we need to make sure we’re letting both merchants and NY state know that.
What am I missing here?
[Update] Gary from AvantLink adds this in the comments on their blog post:
4Gary M on Jun 3, 2008 at 6:30 am:
Our recommendation does not disallow email marketing and PPC altogether. Rather, email and PPC targeted at New York residents.
While that’s a good point and clarification of the suggested terms, I still don’t think it’s a fix for many/most affiliates doing business in NY state or with their residents. Geo-targeting is an expensive proposition and this seems to be putting yet more responsibility on the affiliate and further alleviating the merchant from responsibility or diligence.
There has been much hand wringing in the world of affiliate marketing over the so-called New York state “affiliate tax.” However, as Trust points out on ABW, it doesn’t seem that 99% of merchants running affiliate programs care much…
How Are Merchants Finding Out About This? – ABestWeb Affiliate Marketing Forum: “Looking at this list and I only see about 40 merchants (so far) which is maybe at most 1% – 2% of merchants with affiliate programs who have dropped NY affiliates. So was wondering if we have a whole bunch more coming and if all the merchants know about this or what. Or if it’s going to be an overall small percentage that drop affiliates.”
Is that a symptom of poor communication by New York state legal authorities, legal counsels, affiliates…or is this really not that big of deal?
There have been a plethora (literally) of blog posts in the affiliate-blog-osphere about the issue ranging from Shawn Collins and Linda Buquet‘s respective reporting to ReveNews coverage to Peter Bordes at Relevantly Speaking chiming in to our discussions on GeekCast to even networks like ShareASale offering strong and well thought-out advice for merchants.
However, merchants really don’t seem to be paying too much attention to all of this.
Once again, I defer to Trust on ABW:
I guess I was expecting a whole slew of new drop notices today, haven’t seen anybody post anything new. In the end if it winds up only being about 1% – 2% then that’s really not much at all. I guess we’ll have to wait to see how this turns out but at this point not as bad as I thought it would be. Time will tell.
Is this just the latest Froogle?
I’m not so sure. I do think there is a considerable need for affiliate marketers to educate and inform merchants about the viability and importance of the performance channel in terms of their bottom line, but “affiliate marketing” as we know it is SO wide ranging and dispersed at this point that it would take Microsoft creating their own loyalty program to get us to organize… oh, wait.
In other words, our conception of “affiliate marketing” (in my opinion) is rapidly evolving away from just the network/affiliate model that has served us well (and badly) for the last decade. “We” are moving into video, lead gen, offline, mobile, widgets, social media, search and all sorts of places that we didn’t envision a decade ago. I would venture to say that at least 75% of the people doing affiliate marketing don’t even know they are doing affiliate marketing.
I’m not arguing for a name change or anything of that nature. However, I do want us to realize that while the NY affiliate tax has certainly caused its share of fear and loathing, we need to realize that this industry has fractured and continues to move away from anything resembling an industry. Coming up with an organized group to represent its needs and views may be as difficult as getting merchants to address the NY state issue.
So here’s my take: Merchants are letting legal figure this out (if they even need to). We should be proactive but realize that interstate commerce is a very complicated subject and requires highly skilled lawyers (and such) to grok. I doubt if NY state’s tax will survive the appeal process based on my understanding of what’s happening, but I’m no lawyer.
In the meantime, it looks to be business as usual.
Commission Junction is currently sending out this very legal sounding email to publishers encouraging them to perform due dilligence with a link to a PDF from NY state’s tax office…
As you may already know, the State of New York recently enacted new legislation that addresses tax registration, collection, and other time-sensitive obligations. As with all laws, this law may or may not apply to you and your business. We are actively monitoring the law and will use reasonable efforts to protect ourselves and our publishers as we deem appropriate.
The application of the law is dependent on particular business and factual circumstances, and Commission Junction is not in a position to provide legal and tax advice regarding this law. However, we encourage you to perform the appropriate due diligence as it relates to your business.
For your convenience, we have provided a link to a memo from the New York State Department of Taxation and Finance, Office of Tax Policy Analysis, Taxpayer Guidance Division that addresses the new legislation:
While certainly not as personal and emphatic as ShareASale’s response on their blog or on the ABW forum, it is a little heart warming to see CJ addressing the issue.
I was hoping for more of a “these are the steps we will take to educate merchants and protect our publishers” type email, but it looks like this is all we’re going to get from CJ at this point.
Thanks to @Trust on Twitter for the link to ABW forum discussing the NY State affiliate tax issue and the possibility that some merchants such as Drs Foster and Smith are removing affiliates based in New York state due to a new state law there attempting to collect taxes (and back taxes) on internet commerce:
The NEW NY Internet TAX Law – ABestWeb Affiliate Marketing Forum: “It begins
Due to the new online tax law in New York State we have decided to remove all New York state affiliates until this issue is clarified. We regret having to do this and hope that after further clarification or the law being struck down, that we will revisit this issue and hopefully be able to resume the productive business relationships we have enjoyed with you.
We appreciate your understanding in this matter and look forward to working with you again in the future.
The Drs. Foster and Smith Affiliate Team”
Head over to ABW for the full discussion (currently around 3 pages). This is certainly an issue that affiliate marketers need to be familiar with since many cash-strapped states may turn to more regulated taxing of internet commerce to fill their coffers.
NY state is truly a canary in the mine here.