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.
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Ha! NY will get less in profit taxes as online sellers will close their businesses in that state… Stupid move generated by greed - NY government will lose more than gain from this.
Gee, we didn’t see that coming!
Good job Overstock! You guys are my new heroes!
Everybody follow suit, and it’ll bring this senseless law to an end before it’s even challenged in court!
Hey Overstock, do you mind if others use your letter as a template?
It is bad as it would eventually hit the consumer in one form or another.
New York isn’t just going after business that sell online, they went after me to see if my business was paying Use taxes, (which are the tax that you self claim on your year end filing). The audit cost me a small fortune for them to only find a minor amount of use taxes owed. We did also find out that I have paid sales tax where I shouldn’t of, which was a lot more than the settlement amount. Now to try and collect it! NY Sales tax strategy = FAIL
NY is in trouble now. Wait until the public outcry comes to the streets.
This is what happens when you have Liberals running your government.
I hate NY
B
“Amazon Tax” = taxation without representation… time for a revolution.
Texas is thinking about doing the same thing.
Red Sox Yo Yo…Yankees Go Go
Liberals +Taxes = FAIL!
Ouch, that hurts the affiliates….
This is bad news for me. I live in NY and am an affiliate of many online stores.
I can understand why the state wants their cut. But going this route will actually affect the revenue of many NY affiliates.
Just another way the system makes bad moves.
Once again, NY leading the way in idiotic ideas to kick business in the nuts while helping no one at all. How is this state still in business?
Jersey City.. here i come!
@#13 If I was you and I was losing more than $500 a day I would be on the streets with signs. This is nothing more than an attack on small businesses (i.e Affiliates).
NY’s bad rep in Sales Tax continues. It is known to be over aggressive in ST collection and is the cause of many good businesses locating in bordering states.
NY City also have a nearly 10% income tax over and above state tax, so along with Federal 30% + State 10%, you also have to pay another 8.5% city income tax.
Really a shame and has been holding Silicon Alley back
This is exactly what harmonized tax and Quebec tax did in Canada.
If you buy something at TigerDirect.ca in Ontario, you have to pay the 7.5 percent Quebec tax and or Harmonized Tax for other provinces in addition to the 5% federal sales tax.
It destroyed much of the online business in Canada.
This is part of why doing business in Canada is such a very bad idea.
Just to be clear. I closed the company down and came to California. I also lived in NYS before Canada. Glad not to be back there either.
The goal is to move away from these people and to go to the warmest, most care free business environment possible in North America. Except Mexico, that just sucks.
F NY! No tax for you, come back…. NEVER!
Between the Amazon lawsuit, more stores like this dropping NY affiliates, and increasing numbers of annoyed NY affiliates, it’ll be interesting to see how long until NY backs off of this tax. I’m sure it’ll be a question of if and not when.
I would hope that the incompetent fools in NY’s government responsible for this nonsense are propmptly fired. It would be only fair in regards to the lost business. I’m so glad I moved out of this retarded state last year
It’s also interesting because NYC has been pushing for a while to abolish all sales tax on clothes and other shopping (in a bid to keep the city buzzing w/ shoppers and grab some business back from NJ and other places that have no tax). Check your receipt after shopping in NYC these days and you’ll see no entry for sales tax.
The Amazon tax seems to go in the other direction.
This is classic greed on the part of the government. Typical in every way. I’m sure in a matter of years there will be no safe haven to Internet shopping, politicians will find a way to get more money from us and once the tax is in place there is no way in hell it will ever go away again.
NY is just a lame state. They got no Silicon Valley, just a bunch of corporate stiffs in Wall Street. So lame. So so so so so so LAME. What idiots.
Meanwhile, affiliates who made their living online are now shafted!
Win win for everyone!
(I mean that literally!)
They should tell customers they can’t ship to NY, or only ship to NY one day a week or something, and mobilize the larger portion of the population: the portion that purchases.
I suspect the more fleet of foot affiliates will re-0register as new Overstock affiliates, but with a non-NY address. I mean, how hard is it for someone in NY to set up a PO Box in an adjacent state. Problem solved.
Am I the only one who’s going to take the other side of this?
With more and more shopping going online, the states are probably missing out on much needed tax dollars. If they don’t get it from sales tax, they’ll have to find another way to tax you.
And let’s face it, what’s really the difference between buying an item in a store, or online these days? Its giving the big web sites an unfair advantage over the “mom and pop stores” on an already uneven playing field.
Wade: Nice spin. The other way to look at it is that little mom-n-pop web stores have an advantage over big brick-n-mortar giants. (It’s easier to set up a small webpage than a small b&m store, BTW. That’s why small websites could grow into big websites in only a couple years.) They should be encouraging people to start websites in NY, not driving them away, if they want tax money from them.
This tax does seem inconsistent: states have never taxed mail-order purchases. Why does using TCP/IP make it more taxable than using POTS?
If NY is running a deficit, that’s all the more reason not to make stupid tax policies that will drive away business. I used to live in NY, and it had by far the craziest state tax of any state I’ve ever lived in. Back around 2000, they had a form where you were supposed to declare all internet purchases on your state income tax form so they could tax those; I don’t think anybody ever did, which is probably why they’re trying this.
NY State provides services for brick and mortar stores. Other than a tiny bit of road space, what does NY do to deserve these taxes?
It’s amazing how much my tax bill has increased lately. Inflation is driving everyone into higher tax brackets (they’re not inflation-indexed). But, gov’t seems to be getting worse and worse.
It’s amazing how inefficient gov’t is compared to startups. Here in LA, over 21,000 city workers make over $70k base and over 6,000 make over $100K (and many much, much more). Yet most don’t seem to do all that much.
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WWD believes this tax will have the unintended consequence of of halting the growth of — and investment in — social media sites. That means blogs, bookmarking, social networking, search. Bad days in the Valley.
http://wwd.com/issue/article/125629
Patrick Byrne, the CEO of Overstock shared great insight on this tax issue in a recent interview. He also talked about how affiliates can become involved.
http://meetinnovators.com/2008.....rstockcom/
This is good news for me.
This crap law takes another business trying to last in NY…but NO. Valore Books closing its shop here in Buffalo, and moving to San Diego…for this tax reason ONLY. When will the voters of New York understand and realize it is the tax CUTTERS, NOT DEMOCRATS, that create opportunities and job creation (in the private sector, not tax funded jobs) for economic growth in NY, and all over America. Wake Up People.
What a crazy state of affairs! States are going to almost any lengths nowadays to increase their revenues. Counter-productive if you ask me.