Advertising Law Blog

In what is likely to be a sign of things to come, major online retailer Overstock.com has decided to terminate its relationship with any affiliate based in New York in order to avoid remitting NY states sales tax under the "Amazon" tax law slated to take effect June 1^st.

On the flipside, despite a pending lawsuit challenging the statute, Amazon.com has said that it will add sales tax to orders shipped to New York when the law takes effect.

The new law is based on a novel definition of what constitutes a presence in the state: The law defines a vendor as The term vendor includes persons who solicit business within the state through employees, independent contractors, agents or other representatives and, by reason thereof, make sales to persons within the state of tangible personal property or services that are subject to sales tax. Accordingly, if a business located outside New York State solicits sales of taxable tangible personal property or services through employees, salespersons, independent contractors, agents, or other representatives located in New York State, the business must register as a vendor and obtain a Certificate of Authority for New York State sales tax purposes.

Thus, under the law, a New York based website that that earns a referral fee for sending customers to an online retailer would make that retailer a vendor for New York tax purposes.

Law requires registration and collection beginning June 1^st . Guidance issued by the New York Office of Tax Policy Analysis is attached.