NYAffiliateVoice

The NY Tax session at Affiliate Summit East was an incredible experience for a few reasons. The impact of this session is tremendous. Of course having the opportunity to present to merchants and affiliates a solution that would enable them to resume a business relationship was the primary objective, we accomplished other things.

The NY Tax session enabled me to share more than the solution. Our session was structured it so that we could each share the impact of the law. It was critical for the merchants at the session to see that New York affiliates were being destroyed. We were not just hobbyists losing a merchant; we were business owners being destroyed. For the most part, we are not in affiliate marketing to pay for vacations; we do it to support our families. Affiliates needed to see the merchants’ perspective and realize that it was not as simple as we may have thought.

When we moved on to presenting the solution I could tell that many were shocked. Those that hadn’t yet seen the sample documentation were amazed at the simplicity of it all. The solution was very well received at the session and afterwards. Many merchants are moving forward with the solution; they indicated that they will be presenting the solution to their legal departments.

New York Affiliates came to Affiliate summit with a plan of helping to educate merchants and other affiliates on the NY tax issue. We carried samples of the documents and made sure every merchant we spoke to was aware of the availability of sample documents to enable them to continue or resume partnering with NY affiliates. As with the merchants and affiliates at the session, those we spoke to were excited and eager to move forward. I am receiving many emails from merchants who appreciated our efforts at the Summit. More importantly they are taking steps to reinstate New York Affiliates!

The impact of the NY Tax session at the Affiliate Summit stretches out beyond the positive reaction to the solution and reinstatement of NY Affiliates.

For me a personal highlight was having merchants approach me and give me a hug. As they hugged many said the same thing “I am sorry I just didn’t know.” That small gesture shows that they not only appreciated our work but that they understood the journey NY affiliates have been on. During private conversations many remarked how they had no idea of the real impact on affiliates of the mass removals from programs. The fact that so many of them now had an idea means that much was gained from all of our hard work.

NY Affiliates and the affiliate industry should see that much was accomplished as a result of using our voices and taking action. NY Affiliates did not just sit around and wait for a solution; we did not just accept the situation. We took control of our businesses, raised our voices took action and left our mark.

We have shown not only the power of individuals but the power of working together towards a common goal. We showed that each aspect of this business is important and we need to respect one another. Whether you are a member of an organization, an emerging organization or an informal group like the “Albany group” you can make a difference - and there is room enough for all. We will never all agree on anything but we can still work towards the same goal.  The key to it all is open and honest communication and always moving forward.

The NY Tax Session at Affiliate Summit was an amazing and productive experience that benefited many. I decided to split my thoughts on the session into two posts - Summary and Impact. During the NY Tax Issues and Solution at Affiliate Summit East 2008, the panel had the the opportunity to discuss not only the solution and knowledge of the law but also the impact it has had.

During our introductions, Clarke D Walton, Internet attorney;  Chris Henger, of Google Affiliate Network; Kim Rodgers, Affiliate Manager of 4Checks and I each had an opportunity to present how the law affected us. The discussion was moderated by Adam Riemer.

I had the opportunity to present the impact the law has had on affiliates. I began by explaining that NYAffiliateVoice.com is my personal blog and is independent of any group. I felt that was important because it had to be clear that any opinions I expressed were my own. I gave an overview of what it was like mid-May thru the current day. I spoke of receiving terminations, of work that had to be done and redone over again when a new round of terminations hit. I tried to liken it to a store owner having a store with nothing on the shelves yet still trying to earn a living.

I provided a brief summary of the Albany meeting that Kevin Webster and I co chaired. I tried to convey that the key to the success in Albany was that affiliates, merchants and program managers met for a business meeting and worked together as business partners; and we did this with mutual respect. I mentioned that we had retained a NYS Tax attorney  for services and as a result we had not only an understanding of the law we had the solution.

Kim Rodgers, Affiliate Manager of 4Checks then spoke on the impact of the law on her company and what she did to work through it.  She described what it was like for her that last week in May when the decision was made to terminate NY Affiliates. She announced that her company was now allowing NY affiliates back into her program and confirmed that the process was indeed simple.

Clarke D Walton, Internet attorney, presented definition of nexus and other keywords as well as an explanation of the current law  with and overview of what led up to it. It was reassuring to many to have a lawyer on the panel with knowledge and understanding of the law. Chris Henger, of Google Affiliate Network, presented the network perspective and the steps they have taken to facilitate merchants gathering the information they require. Google Affiliate Network has taken an initiative and makes it very simple for merchants to obtain the information they need to both help make educated decisions and to implement the solution. In my opinion, opening up a direct communication channel between affiliate and merchant is a critical part of improving the industry.

In the next part of the session Kim and I presented the solution. We then all discussed the solution and passed out copies of the paperwork. We took questions from the audience. The solution was well received and I think many were shocked as to how simple it is. If you missed the session and are not familiar with the steps to comply with the law, I’ve posted  an overview of the NY Tax Solution here.

I think we brought clarity and understanding to not only the tax issue and solution, but on another issue that is critical aspect of our industry. I’ll talk more about that in my next post.

We had good feedback from the audience both during and after the session. I exchanged several business cards but if we missed each other please feel free to contact me via this website or even facebook.

It was an honor to sit on the panel with Adam, Clark, Chris and Kim. I received several compliments that we were a great team,  and I am proud to have been able to participate.

Many thanks to Shawn Collins and Missy Ward for adding the New York Tax session to the Affiliate Summit. Based on the feedback I received, many New York Affiliates will benefit from the session as reinstatement to several programs is about to happen. More about the impact of the tax session in my next post.

As a direct result of our meeting in Albany and having retained legal counsel, we have the necessary documents that will permit merchants to resume partnership with NY affiliates. The main stumbling blocks over the last two months was a lack of understanding of the requirements to comply with the tax law and the lacking of the necessary written agreements.

We have been advised by our New York State Tax attorney that there is a simple two step process that merchants and affiliates need to take to be in compliance.

There are two documents to download that include steps merchants need to take and more importantly, sample agreements. The links to these documents are at end of this post.

This post is only an overview, please download both documents for additional details and explanations. Use all information to assist you. It is not meant to replace the advice of your own lawyer or accountant but to ease the process of implementing the solution.

Step one is to add terms to affiliate agreement.Out of state merchants need to add a contractual condition to their affiliate program terms that prohibits New York affiliates from solicitation activities.

We now have the paragraphs that need to be added to terms.

Step two is Proof of compliance.This is accomplished by requiring affiliates to submit on a yearly basis,  a signed certification that they, the affiliate, have in the previous year complied with the terms of the agreement. This agreement is due on or before May 31 of every year and must be retained by the merchant.

We now have a sample agreement.

Here is the link to our version of letter outlining steps to take and all the sample agreements. Letter to merchants outlining Merchant’s Two Steps to Comply with NY  Internet Tax Law.

We are also providing the lawyers’ version of letter to merchants. This detailed versions offers some background information and additional details that some CFO’s, CEO’s and others might prefer. Detailed Information on How to Comply with Tax Law.

Download both documents. Read through both documents and understand them.

This is the solution and we have done the necessary work to make it easy to implement.

Several people have been involved with this and it is our hope that you find it helpful. We worked together, one goal and no politics. We had no motivation aside from finding a way to keep our businesses.

I and thousands of other New York Affiliates look forward to resuming our partnerships with merchants.

The NY Tax Session at Affiliate Summit is on Sunday at 3:00. This is an important session and I urge you to attend.

Who should attend?

• Every NY affiliate
• Every Network
• Every Merchant who sells to NY residents.
• Every Affiliate Program manager.
• Any affiliate who resides in a state that charges any kind of sales tax.

It is very important session for the affiliate industry. You will learn how serious the issue is and that there are far more merchants who have dumped NY affiliates. You will learn that many lives are severely impacted by this over the last two months. Thousands and thousands of affiliates and their families are bearing the brunt of this, but others are also affected. Merchants, affiliate managers and networks are all susceptible to decreased revenues as a result of not partnering with NY affiliates. You will also learn that it is going to steam roll. Other states are watching this issue closely. It will probably  be several years before the Amazon lawsuit is settled, so riding it out til then is not an alternative.

At this session you will also learn that there is a solution for the NY tax situation. As a direct result of our meeting in Albany in July, we retained the services of a New York Tax lawyer to draft the necessary paperwork that will permit merchants to let us into their programs. We are now ready to be reinstated into all programs. We are looking to implement the solution and everyone in the affiliate industry needs to be aware of the current situation.

We will make our findings available to everyone to facilitate our reinstatement to programs.

If you are currently affected by the NY tax issue you need to be there to stand up for yourself, your family and your business.

If you are not directly affected right now, you need to be there to see how you can protect yourself and your business when your state government makes their move to collect the same taxes. The tax issue will steam roll and you need to be prepared. New York is simply the first state to act.

The key to the NY tax issue has been us putting forth an effort to understand the law and then find a solution. New York affiliates have taken an initiative. Now you need to take the next step, so be sure to attend the NY Tax session at the Summit - the survival of your business may depend on it.

I received a couple of queries as to the likelihood of a repeal of the tax. Although I hinted at it in my posts Repeal has Little Appeal and  Our Efforts Working for Repeal I will share my thoughts here.

Prior to our meeting in Albany, I was very pessimistic that the law could be repealed. My first reason for thinking this is I believed that the Senate merely passed the bill for public image reasons. The other reason was and is the current financial conditions here in New York. New York is facing very tough financial times, right now an estimated 26 billion dollar deficit. The state needs the money.

My personal opinion is that the likelihood of a repeal, by way of the current bill, is slim. Even though it has passed the Senate it must pass the Assembly. The Assembly will only vote if the Ways and Means Committee pushes the bill forward, it can sit in committee for a while. Once the Assembly votes, if passed, it will then go to the Governor. I believe that we will have a huge battle there. My opinion is that he would veto the bill.

Having said that, I still believe that we need to work this avenue and push for repeal. The reason is to keep attention on the issue and get it out into the public eye. We must do this in order to support the Amazon/Overstock lawsuit and to influence future legislation.

As I briefly mentioned in my post on pushing for repeal, we have to make sure everyone is aware of profound effect this law has had on individuals and non profit groups. Lets take the non profit groups first. Right now Boy Scouts, religious groups, veteran groups and all other non profit groups need to rely more on fundraisers. These groups are seeing federal and state funding slashed and are struggling to make up the deficits. These groups are now suffering as a direct result of the Internet tax. Even with the solution of the affiliate agreement, these groups will still have other hurdles to jump.  Just as I believed that the Senate passed the bill for their image, the Assembly can be swayed to do the same. No one wants to be known as hurting non profit groups.

The second reason I believe we need to pursue this avenue is that we must share with the politicians the impact this is having on thousands of small business owners ie the thousands of affiliates who are seeing their businesses destroyed by the loss of income.  We need to remind them that lower income means less income tax revenue for the state; lower income also means less disposable income. If our elected politicians know how widespread the impact is then we have leverage.

The last reason I think we need to persue this is that we can lay the groundwork for improved legislation. The current law and the current bill both clearly indicate that we need to educate the politicians so that they may draft legislation that meets both the needs of the affiliate marketing industry, the needs of the residents and the needs of our government.

Other states are keeping a close eye on all of this. The Amazon/Overstock lawsuit will take years to resolve. It is estimated that it will be at least five years before anything is final in that case.

To summarize, while I personally believe that repeal of the affiliate tax will not happen with the current bill, I do believe we must continue our efforts to push for repeal. The end result will be that there is improved legislation that will benefit everyone - the affiliates, the merchants and the people of not just New York State but every state.

As a result of the July 28 affiliate meeting in Albany, we are also directing some of our attention to the New York State Senate and the New York State Assembly. You will recall that the Senate voted to repeal the affiliate tax on June 19. That bill was sponsored by the Rules Committee. The bill was sent to the State Assembly who quickly referred it to the Ways and Means Committee. The bill will sit there until they decide to do something. We believe that the Senate bill to repeal the affiliate tax was sparked, at least in part by the devastating effect the law has had on non profit groups such as the Boys Scouts.

While our solution of the signed agreement will solve the problem for most affiliates, nonprofit groups are faced with additional requirements. This law severely hampers their ability to raise funds to support their causes. I post more about that in a future post.

I have been in correspondence with Karen McMahon as to how to best approach the political avenue. Her valuable and informed advice will definitely facilitate this aspect of our work.  We are going to focus our energy and time where it will be most effective.

We, as a group, will begin to identify those from the Rules committee that supported the bill and ask for their assistance and input. They may be able to point us in the right direction in order to get a sponsor on the Ways and Means Committee, as well as help identify those who will help us get the bill to pass.

Karen has also indicated that it is critical that we contact our Assembly members. This is where every affiliate needs to let their voice be heard.

Every affiliate needs to take action. Call your Assembly member’s office and email them and let your affiliate voice be heard. Request a meeting and tell them in person about the impact of the law. Many of the elected officials will be in their home offices so it will  be easier to call them and easier to get a meeting. Let them know how this has affected you. Tell them about the number of merchants who terminated NY affiliates. Let them know about your loss of income. Let them know that there are thousands of New York affiliates losing their businesses.

Do all of this in a professional manner. Treat them with respect. Identify yourself as a constituent and ask them for their assistance. If you know of other affiliates living near you work together. Have your friends and families contact their Assembly member.

If your Assembly member sits on the Ways and Means Committee your voice can have even more impact.

If there has ever been a time for affiliates to make their voices heard this is it.  We proved in Albany that we can work together to accomplish amazing things. That meeting was possible due to the support from many  and we need to move forward. Look at what we have accomplished so far.  Imagine what we can accomplish in the future.

We never need to totally agree, but we do need to work together.  I have said it a few times today but it deserves repeating - Together we are a great team.

A big thank you to Karen McMahon for her fabulous insights and advice.

As I mentioned in my last post, Tax Solution from NY Meeting, we identified the solution to the NY Affiliate tax situation.  The solution was clearly indicated in the memos released by NYS. To briefly recap, out of state merchants  with no other cause of nexus in NY, will need to have a signed agreement on file from NY affiliates stating that the affiliate from NY will adhere to certain guidelines. Although NYS has indicated they will at some time prepare a sample agreement we are not waiting for it.

On Tuesday, July 30, we retained the law firm to draft a letter that will clearly state the steps affiliates and merchants will need to take. We are also obtaining from them a sample agreement to be signed by affiliates and kept by merchant.  We are taking these steps in order to facilitate our reinstatement into programs.

The informational letter and sample agreement drafted by our lawyers will be made readily available. I was given an tentative date of early next week for the initial drafts and I will post updates to time frame.

We firmly believe that by taking the initiative, offers of reinstatement should be forthcoming soon.  We have worked very hard to find a way to be able to continue to work with all merchants and we look forward to renewing our partnerships.

We are continuing to move forward to implement the solution and I will continue to update you on our progress.

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The NYS Affiliate meeting in Albany on July 28 was a great success. It accomplished several things and it will most likely take a couple posts to get it all in. I will post summaries of the major points over the next couple days. We also had time for some fun and will write about that but I am sure everyone is interested in the solution we arrived at.

 We were fortunate to have a lawyer present that not only understood the tax law but was able to communicate with us in an informative and entertaining manner. Mark Klein, of Hodgson Russ Attorneys, began with a brief history of other sales tax related issues that led up to the current tax law.  He also defined for us several terms so that we were all clear as to accurate definitions.

Mr. Klein moved on to the current law and most importantly the June 30 memo from the New York State Department of Taxation and Finance, NYS tax memoTSB-M-08(3.1s) . Within this memo lies the solution for merchants and affiliates. He explained that NYS affiliates can work with out of state merchants as long as the affiliate agrees to what is being called safe practices. This agreement must be in writing, signed by the affiliate and kept on file by the merchant. In short the affiliate must only engage in advertising their sites or specific products but not advertise the merchant direct. The NYS tax department is working on releasing a template for the agreement and I will be sure to link to it so it is readily available.  

I want to give an example and please realize this is my understanding and not meant to replace a lawyer advice or opinion. Please take this information to your own tax lawyer, it is only meant as a starting point for you.

 I as an affiliate want to sell checks to NY residents, I can promote checks from an out of state merchant without creating a nexus if I agree to adhere to safe practices. There will be certain limitations. I cannot do direct ppc to the check merchant; I cannot put up flyers that name the merchants; I cannot solicit sales directly from NY residents directly for the merchant.  What I can do is promote my site! I can promote my website or web page that has those very same checks and of course the links to the merchants.  I can advertise and promote my site. And that is what the many of us do anyway! We promote our sites and our pages.

The typical content affiliate is fine. We can work with out of state merchants as long as we agree to follow the safe practices. This agreement must be in writing and renewed on a yearly basis. It must be kept on file at the merchants location. If you are a merchant, affiliate program manager or outsourced program manager please note that the vast majority of affiliates will probably agree to this. Some sites such as loyalty and member sites have additional issues but, for the sake of simplicity, those will be addressed in a separate post.

We met as a group in Albany to seek clarification on the law so that we could find a solution. What we found was that the solution is already there. It was spelled out in the memo of July 30.

We need to continue working together to now put the solution into action. We will be getting a clear step by step procedure for merchants and affiliates to use so that we can all resume our business partnerships. I will gladly share the information so that we can move forward.

It seems like NY affiliates are being hit with a virus. The outbreak was first observed back in the middle of May. Over the past two months the infection has gained momentum. Symptoms include inability to work, reduced income and decreased interest in websites. The symptoms increase in intensity with each new termination from a program and when each application to a new merchant is rejected based on applicants geographical location. The loss of income and the struggle to move forward can also lead to depression. The final stage is the decision to leave affiliate marketing.

To understand what it is like to be an affiliate from New York imagine the following. Imagine you own a store in town. Each Monday as you arrive to open for the day you have a notice that another of your suppliers will no longer do business with you. Some of the items can’t be found any where else. Other items are sold by other suppliers but they still haven’t agreed to do business with you. Slowly your shelves are emptying,  and you have nothing to fill them with. You can see how hard it is to remain optimistic.

Maybe the above is a little dramatic but the point remains. NY affiliates are facing a big challenge in keeping their business afloat. Some are finding that is difficult to recover. It is now about two months after the first terminations began to hit and the decreased income is now being felt. Back in late May and early June, affiliates wondered how they were going to adjust and survive. Overall, in spite of the confusion and the uncertainty, we were mostly optimistic, though we knew it would be an adjustment.

Now, two months later, I see a different situation. It is more divided. Some affiliates have either been able to fall back on other sources of income or are starting to see their business recover. For many it is a different story. Far too many are doubtful about their future in affiliate marketing. Many are deciding that the struggle is just not worth it.

Over the past two months many New York affiliates have been struggling to survive and forced to make adjustments. How quickly an affiliate could adjust depended on many variables including the niche, the business model, and the products and merchants that needed to be replaced. In some cases it is proving to be impossible to recover.  

We don’t mind adjusting our business and finding new merchants but the problem is the everchanging scene. Merchants are continuing to drop NY affiliates. They did so as recently as July 21. There are far more merchants who have decided to not work with NY affiliates than appear on any list. The plain and simple truth is that merchants who do not have any other cause of nexus are refusing to work with NY affiliates. Some may deny it is so, but they aren’t New York affiliates. Others say it is only 1 or 2% but that number is far from accurate.

The effect of the current situation is not merely decreased income. I have come to the realization that many NY affiliates are becoming depressed. Affiliates in general have drive, ambition, creativity and an independent streak but it is difficult to maintain optimism when you don’t have a fighting chance. It is hard to avoid feeling depressed when you are losing your business.

The next two months will be make or break for many affiliates from NY. We’ll see what we can accomplish at our meeting next week in Albany and also see what happens at Affiliate Summit East.

Getting clarity on the law is just the first step. The next steps involve us sitting down with the program managers and others who are joining us at the NY affiliate meeting and finding a solution. My hope is that the program managers will be able to convince their higher ups that collecting taxes is the best solution for now rather than refusing to work with us and waiting for it to play out in the courts. Perhaps there is another solution, we will know more by next Monday.

Then the next test for many will be in Boston at Affiliate Summit East. At that time NY affiliates will be able to touch base with more merchants and get a better idea of where we stand. Right now there is no accurate list of merchants who will or won’t work with NY affiliates.

Over the next couple months we will probably see that the loss of income is not just short term. For many it will be long term. I also foresee another wave of terminations just before fourth quarter.

Someone asked me the other day where I thought my business would be six months from now. My answer is I do not know. It’s hard to think when you have a virus.

The repeal of what we are all calling the NY affiliate tax was the headline in a few blogs over the past few days. Maybe I’ve been suffering from the NY affiliate Depression syndrome but I was not optimistic that it meant anything.

When it was first posted at the NY affiliate forum the morning of July 16, I held off posting my opinion right away. Some people were happy and I didn’t want to bring any one down so early in the morning.  I did some quick research and saw that the NY Senate voted to repeal it on the 24 of June and passed it over to the Assembly. They in turn referred it to the Ways and Means Committee. Granted I wasn’t sure what that meant in terms of the status of the law but knowing that NY released a memo on June 30 I was not excited about any of it so I finally posted my opinion on the status of the appeal at the NY Affiliate forum. It seemed like a long period of time that many were optimistic, it was less than two hours. A little later when I further learned that no one was endorsing the bill, I felt about the same.

Today I was reading thru some blogs and found a post at Shawn Collin’s Affiliate Marketing Blog with some excellent information from Karen McMahon. Definitely one of those must read posts. Take a few moments to read Status of the NY Affiliate Tax Repeal at Shawn’s blog.

Bottom line, don’t get too excited about the repeal. Since the bill is now in the Ways & Means committee without a sponsor, and they have to approve it before passing it for a vote in the Assembly, not much more is expected to happen until 2009 (if at all), and that’s a long way away.