Affiliates Nervously Await Outcome Of Amazon Tax Challenge

Writing by Nick Stamoulis on Wednesday, 7 of May , 2008 at 8:48 am

Amazon is challenging the lawfulness of New York State’s legislation that requires internet retailers to collect sales tax on purchases shipped to New York State residents.

Although Amazon does not have a physical presence in the state, New York is arguing that Amazon allows web publishers to receive commissions by promoting their items through their sites. By default this makes Amazon liable to collect taxes on its behalf for those affiliates who live in New York.

If Amazon lose their challenge there will be ramifications for many thousands of affiliate programs that are currently available. It would be interesting to see if New York State would extend this to every one of those affiliate programs, including those based outside of the United States.

Many of these affiliate owners will be hoping that Amazon wins this challenge. They are all caught in a catch 22 situation at present. Register to collect tax by the June 1 this year or face the prospect of having previous quarters audited. A damned if you do and damned if you don’t position.

This would raise a second interesting question. Can New York State tax officials audit the accounts of businesses registered and trading in another state, or for that matter, in another country? Certainly when it comes to international companies this tax has not been terribly well thought through.

In the mean time, every affiliate owner will be watching this case with a little unease. Hopefully it will be resolved quickly with a bit of common sense being applied. However, when it comes to litigation, speed is not an area where the law excels. When it comes to taxation, common sense never applies.

Category: Affiliate Marketing

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