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Tax Solution from NYS Meeting

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.


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