I’m working on a few projects right now that could be loosely defined as affiliate marketing.  In my case, they are more private referral agreements, not big, public affiliate marketing.  Still, I keep an eye on things that might affect my clients who are heavily involved in affiliate marketing.

And I think there could be a new problem brewing.  You might have heard about the “Amazon Tax” that New York came up with this last year.  It’s not really just about Amazon, but they were the ones who took it to court to fight it.  The deal is that New York put in place a sales tax requirement for any company that sold a product and had an affiliate in the state of New York.  So, for example, if you put a link on your website that said “Buy this book!” and had a picture that linked back to Amazon’s affiliate program so that someone clicked through and bought the book, you’d get paid a small affiliate fee.  

If you lived in New York, then Amazon would be responsible for collecting and paying a sales tax to New York for that transaction.  So, let’s say Amazon (headquartered in WA) sells a product to someone located in WA.  In normal circumstances, WA would get the sales tax.  Now, though, New York wants sales tax too.  

Most companies responded by dropping their New York based affiliates.

Amazon took the issue to court and it was thrown out, giving a GO! sign to the State of New York.

Now, Minnesota, Connecticut and (gasp!) California are piling on too.  Companies are going to have make a hard decision soon.  Do they drop affiliates in these states as well?  And if they don’t, how do you handle it if you have a sale form one state to a recipient in another state?  In the past, we’ve used a origin based nexus.  In other words, if the company has nexus in the state where a sale is consummated, there is sales tax due.  

The Streamlined Sales Tax Project (SST) is trying to drum up enough support to get a consensus between the majority of the states and create a destination based system.  It’s certainly not ideal, but at least it would be consistent.  

Now, I’m afraid we’re going to have states fighting over who gets to collect the sales tax and the business owners are going to be the ones caught in the middle.  Maybe the only affiliates left standing when this is done will be in Oregon, which doesn’t have a sales tax.