In an attempt to clarify their last memo, NYS released a new memo that right now seems to create more confusion. At first glance it seems to affirm what our current understanding of the law which is that NY affiliates cannot target NY residents on behalf of a merchant or send NY residents directly to a merchant. We can only advertise merchants on our website and cannot conduct any direct to merchant advertising. In addition, we can only conduct business online.
A big requirement in all this is that affiliates (or resident representatives as we are called in the memo) must affirm in writing or electronic signature that we are in compliance with the regulations. That is to say we have to promise not do certain things and cannot direct market merchants to NY residents. A merchant has to have this agreement from all NY affiliates and must firmly believe that we are in compliance. We also will have to divulge information to the merchants and I can see where some merchants might place harsh demands on their affiliates. At a minimum we must provide the merchant with our full names and addresses. This affirmation must be done on a yearly basis.
In addition, and this is a big one, merchants must have faith in our agreement. I can see that some merchants may be unwilling to take that leap of faith with a new affiliate. How far does a merchant have to go to prove they can reasonably put faith in an affirmation? In the event of an audit would a merchant have to prove why they had faith in the agreement or would the state have to show reasons why a merchant should have not accepted the affirmation?
Kevin Webster of 72 Kilowatts presents questions of his own regarding the new memo. Read his thoughts NY Tax Takes Step Back? He too has concerns about the privacy of affiliates but more importantly he wonders about the impact of the restrictions placed on affiliates.
We will all have to take a closer look at this memo. Read the latest NYS Tax Memo June 30 and share your thoughts.
I am sure as the hours pass we will adjust our interpretation of this memo, much like the interpretation of the last memo evolved over days.