Overstock Your PR Sucks – Plus Affiliates Fight NY Tax Law (OSTK)

IMPORTANT UPDATE: 5/31 Overstock Files Suit Against New York!

Complete Coverage of the New York Affiliate Tax Issues Here

Yesterday Overstock released a press release regarding their reason for dropping 3,400 affiliates over the New York, affiliate-driven sales tax issue.

Check out the Overstock Press Release headline! Overstock.com Says ‘Yes’ to New York Consumers, ‘No’ to New York’s New Internet Sales Tax

NO Overstock, you didn’t say ‘Yes’ to New York Consumers – get real! You said YES to your own bottom line! And hurt the bottom line of over 3,400 affiliates in the process.

NO Overstock, you didn’t say NO to the state of New York, you said NO to over 3,400 affiliates who WERE your partners – who WERE helping your bottom line! You threw them under the bus for the all mighty dollar. In case you didn’t know – affiliate marketing is a relationship business!

Overstock, you just killed off a lot more relationships and reputation than you realize! I suspect lots of affiliates across the country will drop your affiliate program in protest.

(NOTE: Be sure to see several other important issues, including how to get involved in fighting the New York tax law, toward the bottom of this post.)

Here are some snippets from the Overstock PR job.

SALT LAKE CITY, May 15 /PRNewswire-FirstCall/ — Overstock.com, Inc. (Nasdaq: OSTK) announced today that it has notified its more than 3,400 New York-based affiliate advertisers that as of June 1, 2008 they can no longer provide advertising for Overstock.com until either New York changes its controversial new internet consumer tax law or the courts say the law is unenforceable. On June 1, the controversial new law will require internet retailers to turn off their New York-based ad partners or collect an up to 9.5% sales tax from all New York internet customers.

“We love New York,” said Patrick Byrne, Overstock.com’s chairman and chief executive officer, “but New York’s new tax law required us to choose between New York customers and New York ad businesses. In the end, we chose our customers.”

Now an interesting question that’s been brewing in the affiliate marketing blogoshere is: Will canning NY affiliates even help Overstock evade this tax?

Adam Viener at WiseAff asks: Will Overstock have to Close or Move their Affiliate Program? “But wait, Overstock’s entire affiliate program is with Linkshare, a New York based company, and Linkshare earns a percentage of EVERY OVERSTOCK AFFILIATE TRANSACTION!!! So based on this, it would appear that Overstock would still be liable for the 9.5% sales tax from, as would every Linkshare merchant.”

In contrast to Overstock’s knee jerk decision to terminate New York affiliates, Amazon, who is fighting the law, took this stance and is standing by their affiliate partners. “Nothing is changing with regard to Amazon’s relationships with Affiliates in New York state. We expect to begin collecting sales tax (as the new legislation requires) no later than June 1, 2008. This, according to the New Your Times article: Overstock.com Throws New York Affiliates Overboard to Avoid Sales Tax


This new New York tax law, if allowed to go unchallenged, will surely be adopted by other states. I reported yesterday, California and other states are already considering it. If you are not a New York affiliate, please don’t sit back thinking this problem does not affect you. It could affect the entire industry. If you want to get involved in somehow lobbying against this law here is an option.

Peter Bordes from MediaTrust is talking to the IAB today to see if there is any way they can help us in this fight. “We at MediaTrust have reached out to the IAB to see what actions are suggested. If you would like to work together as a collective on this issue, please contact MediaTrust thru the following email: affiliatepetition AT gmail.com

In case you haven’t been following, here are previous blogs I’ve written on this important issue.

Warning – California May Copy NY’s Amazon Affiliate Tax Law

Amazon Sues New York State Over Affiliate Related Sales Tax

Overstock Fires New York Affiliates Over New Tax Law

Affiliate Driven Sales Tax Issue Heats Up

RELATED UPDATE – 12:05: Shareasale, so far, to my knowledge, is the only network that has made a public policy statement about New York affiliates and how this tax issue will be handled. Brian blogged today regarding how affiliate privacy issues will be balanced with getting merchants the information they need to comply with the New York law:
Shareasale – NY State and the “Affiliate Sales Tax” Law

20 Comments on Overstock Your PR Sucks – Plus Affiliates Fight NY Tax Law (OSTK)

  1. Linda i hope to have more info ASAP. There is a long string of thoughts about trying to create an affiliate marketing association on revenews http://www.revenews.com/brookschaaf/a-new-industry-association/#comment-16354
    that seems to be a long debate. We dont have time for long debates. We need group action. We don’t need another industry association. We dont have the time for that.

    Its my feeling we work with an existing established association such as the IAB who has a voice in DC and or get behind Amazon who clearly sees this as an issue and is standing up for our affiliate marketing community.

    thank you for this honest post and calling a spade a spade. i don’t understand WHY Overstock would not join Amazon and take a stand… cluck cluck cluck ( is that a chicken?)

  2. Linda how many leaders have stood up to do something about this issue. They could be service & solution providers, bloggers, super affiliates, all affiliates etc… i have to say so far i am shocked at how few have raised there hand and said “i care” or that they want to do something not only about this issue but about needing a voice. It shows how fragmented the large affiliate marketing industry is…… hope to have more news from the MediaTrust / Advaliant camp today!

    Overstock is really pathetic “we choose our customers over our affiliates” are 3,400 affiliates not also customers & partners!

  3. “Linda how many leaders have stood up to do something about this issue. They could be service & solution providers, bloggers, super affiliates, all affiliates etc… i have to say so far i am shocked at how few have raised there hand and said “i care” or that they want to do something not only about this issue”

    Thanks Peter. Not to make excuses for anyone, but I think part of the issue could be that people not in NY see this as “not my problem.” I think some are starting to see how this could spread and affect our entire industry, but people are busy and by default often have a wait and see attitude.

    I’ve been involved in other big issues that hurt our industry, where we tried to rally the troops to affect change, without much success. Most noteably Norton blocking affiliate links by default back in 04. (Norton Blocks Affiliate Links, Banners & Webmaster Revenue). I was the 1st to raise the read flag, started writing articles all over and tried to rally people to action. A couple of us were vocal and fought it, but there was never a unified effort to effect change. We finally did get Norton to change their default to setting to off but it took about a year.

    Anxious to hear if you got anywhere with the IAB and to hear your other news. Keep me posted and you know I’m here to help spread the word.

  4. Linda,

    Carefully read examples 5 and 6 in the law… there is a possibility that simple placing a link on a website (with no further solicitation which includes email) is an activity that would not qualify.

    This law is horribly written and confusing from my perspective… but merchants should carefully consider their options with their legal counsels to see if they either qualify (under examples 2/3 etc…) or are exempt as in example 6.


  5. Thanks SO much for this important info Brian!

    I have to take my 2 yo grand daughter (love of my life!) back to hospital so will be out much of the day. Sorry in advance to Peter or anyone that tries to reply. Can’t approve comments til I get back in the office.

    Going through some really tough times right now. Trying my best to keep family and work balls in the air without dropping anything…

  6. Phillip Dampier | May 20, 2008 at 6:58 am |

    As both a customer and involved in website affiliate programs, I have to say I stand by Overstock and see their position as the stronger one. That’s because Overstock values its customers as its first priority. Sorry, but affiliate programs are VERY secondary to web-based businesses, and should be.

    This story is making headlines across the story, and Overstock has been generating a lot of customer goodwill in NY because everyone is talking about them and this story here in this state. Their marketing department positioned them (effectively) as caring first and foremost for their customers, and not sticking them with 8% sales tax just so some affiliate websites in this state can cash in on the small percentage of total orders placed with Overstock through an affiliate link.

    Let’s get real here. Bashing Overstock for concerns about their bottom line borders on hypocritical when you frame it as hurting an affiliate’s bottom line. It presupposes that affiliates have some special relationship with Overstock that end customers don’t.

    Affiliates are gravy, but in this state, there won’t be any mashed potatoes to put the gravy on as customers flee from retailers like Amazon that are going to impose the tax even as they fight this out. So you are not going to get that revenue anyway.

    This is a war, and everyone INCLUDING affiliates should accept they are going to have to sacrifice as well and quit whining about it. NY residents are already contacting their elected officials to holler about this. Amazon is leading the legal challenge (the only preserved goodwill they get is their lead in challenging this), and affiliates are, thus far, just whining.

    Join the rest of us in fighting the tax and not the retailer! NY based websites can also establish themselves outside of the state and get around this in the meantime.

    What will probably be needed is a federal law prohibiting this kind of taxation because if NY stands, you can guarantee other states will follow. That should be the direction affiliates should be working towards.

  7. Hi Phillip,

    Thanks for weighing in. It’s always good to hear other sides of issues and your points are interesting to hear.

    “Their marketing department positioned them (effectively) as caring first and foremost for their customers, and not sticking them with 8% sales tax just so some affiliate websites in this state can cash in on the small percentage of total orders placed with Overstock through an affiliate link.”

    This is one of those problems where viewpoints would totally change, depending on where you sit. If I was a NY consumer that didn’t really understand affiliate marketing, I would probably see it that way too.

    If you were an Overstock affiliate who was making $3,000 a month from Overstock, who had been loyally sending them sales for years and suddenly had the income taken away and the relationship severed, I dare say, you would feel the same way most of us feel.

    “Join the rest of us in fighting the tax and not the retailer!”

    Phillip, that IS the focus. I and other’s have written lots of other blogs on the topic, all focused on the tax law. We are trying to organize some efforts to rally against the tax law.

    This particular post happens to be about Overstock’s handling of the issue, which almost everyone in our industry has a problem with. If they had taken a stand with Amazon, joined their suit and stood up to fight against the law, rather then dump partners to try to evade the tax, they could come from a position of strength. 2 large companies like that, fighting together could have made a difference!

    FYI here are my other blogs about the tax issue.

    Since you are a NY consumer involved in fighting this law, from the inside of the state and many of us are outside fighting it for fear that, like you said, if it’s allowed to stand it will spread – let’s fight this together! Keep us informed of any initiatives we as an industry can get involved in or that NY affiliates may want to be aware of!


  8. Linda thank you for the comment to Phillip’s. There is not any whining at all. There is only a industry initiative to come together to work at finding a solution. There is a meeting at the IAB today regarding policy. I hope to have a direction one way or another soon.

    We are all fighting the tax not the retailer. What we are also doing is voicing our opinion on how Overstock has handled this vs. Amazon ( who has handled this much better) 3,400 affiliates are not only partners but also consumers…

    and btw affiliate marketing is a very large and very effective and legitimate marketing channel for the e-tailers. This channel drives branding, traffic, transactions and the highest amount of customer brand loyalty of any online marketing channel.

    So Philip please do not diminish the value of the affiliate marketing community. btw I am not a whining little affiliate. I am the CEO of MediaTrust a large network who works on behalf of the merchants, affiliates AND consumers.

  9. Been doing some more thinking about what Phillip said above in comment #8. Phillip is a New York CONSUMER. Read is viewpoints about how affiliates figure into the whole NY tax issue. Then read my reply to him.

    My point is, we as an industry are highly misunderstood, don’t have a positive image with consumers and have little to no leverage with politicians. We don’t have a chance of fighting this law from our own narrow perspective. (see his comments)

    HOWEVER, if we can get some NY affiliates, merchants and networks to join with the NY CONSUMERS who are also fighting against this law, maybe we’ll get somewhere. There is power in numbers and it’s the voters of New York that count! Not a bunch of “rogue Internet marketers” and bloggers from other parts of the country.

    So again Phillip, if you know of any grass roots initiatives to fight this law, that some of our NY residents could get involved in, please let us know.

  10. THanks Peter, sorry just got your comment approved. Was working on another important initiative regrading this issue.

    Linkshare and the DMA have an open conference call about this Thursday and the DMA tax counsel has provided important info regarding their analysis of the law. IMPORTANT INFO! Trying to organize the troops for this call. Read:

    Linkshare/DMA – Join the New York Tax Conference Call PLUS DMA’s Analysis of the Law

    Be sure to see comment #1 about organizing our efforts for this call.

    Peter, let us know what happens with the IAB. PLEASE let your contacts know what the DMA is doing. If those 2 large orgs can join forces to show a unified front it may help us all since we don’t have an industry org.

  11. Yeah, I’m not an affiliate of them or anything, but I’d be willing to something if necessary.

  12. While not always a pessimist, this is only the beginning to states trying to impose their own rules on business’. While not totally comprehensive, this link (http://www.newrules.org/retail/inttax2.html) gives a good perspective on the issue.

    My advice, invest in software companies that specialize in matching up buyers with their state’s tax laws as it affects the retailer’s ability to do that in real time. Besides states coffers, those companies look like they are poised for growth.

    The days of uncomplicated online transactions (on the merchants side) are all but coming to an end. Affiliate programs are a necessary evil for most merchants who have online web presences. Maybe Amazon’s suit will make a difference. My experience tells me if it does anything it will help define the rules, but the revolution has already begun. Some will run (close their affiliate programs in selected states or altogether), but the awaiting tsunami of additional state proposals will make it hard for them to avoid being involved in some way if they do any ecommerce sales at all.

    I am assuming every state will have their own sales tax policy that probably will not be uniform with any others. The fed’s own side of the argument has been to stay on the sidelines and let ecommerce grow organically and face its own growing pains. When it comes to states, the Fed will only intervene if there is a dire emergency. For all of the fallout, it is just business’ moving ahead as usual.

    States just want what they feel is owed to them. It has been so with agents and representatives nexus for many years, with the Internet there has to be an adjustment in the laws regarding the collection of sales taxes to account for the Internet’s ability to have goods sold without physical location in any state except those that a company ships and warehouses from.

    Just like higher gas and food prices, this too will become part of our reality. There is an organization/movement that may offer some amount of sanity to the situation though. http://www.streamlinedsalestax.org/ If you are tired of fighting them, maybe working on easy to implement solutions is the next best thing.

  13. Phillip,

    In response to your comments above… I’d like to add that this issue really isn’t about whether or not NY consumers are forced to pay tax.

    By law, NY consumers must pay tax on all items purchased out of state, regardless. The fact that some (most) consumers completely ignore this law is the reason we are here at this crossroads with the legislation.

    The issue at hand is whether or not a state has the right to force an out-of-state merchant to act as its tax collector.

    I can definitely appreciate your point of view on Overstock, and I understand how it is consumer friendly… but it is important to note that this is not really tax issue. This is not a new tax. It is a tax that has been due all along, and the issue is with who will be responsible for the collection of that tax.

    My point is…. no matter what Overstock does… NY residents still owe that tax.

  14. Hey Jim good to see you weigh in on this and thanks for those links.
    Now my head is really spinning!

    Brian, thanks for bringing up that point again. So many consumers either aren’t aware or knowingly avoid paying sales tax unless they are charged by the merchant. So I’m sure to some it feels like since merchants will suddenly have to start charging this additional tax, it’s this new tax burden – but you’re right, they should have been paying all along anyway… But who ever does voluntarily?

  15. Linda, you are a bit misguided in your logic. Marketing dollars and marketing strategies vary company to company and year to year. The fact that Overstock chose a different strategy over Amazon is their operational decision. While the easy claim is that Overstock.com is throwing 3400 affiliates under the bus the company has presented the argument that few of these affilitiates actually generate volume thus the 3400 number touted is vastly inflated.

    As a former affiliate in a web site I can tell you that the cost to value ratio is far overstated. Checks came few and far between while the affiliate status was free. As a consumer i find solice in the fact that I can purchase on-line free of charge and pay a shipping fee in lieu of a tax. Having to pay both would eventually hurt the overall economy. You know, the big picture in all this.

    What I find most amusing about all this is that there are more than Amazon and Overstock working on-line retail in NY. Where do all the others stand? In NY they will not only lose the tax revenues but the tax revenues on afiliate profits. Having all on-line retailers pull this move (remove affiliates) could untimately have a greater impact because of the move would reduce taxable income instead of creating it. A move with far greater ramifications in my mind. Remember that ultimately there are always two sides to a story and two views. Your attack on Overstock would be as irrational as you claim Overstock has been.

  16. Hi Dave,

    You wrote: “thus the 3400 number touted is vastly inflated.”

    The 3,400 number I referenced (and the NY Times also referenced BTW), was from their own press release so if that number is inflated, their PR firm did it, not me. 😉

    “Overstock.com, Inc. (Nasdaq: OSTK) announced today that it has notified its more than 3,400 New York-based affiliate advertisers…”

    “As a consumer i find solice in the fact that I can purchase on-line free of charge and pay a shipping fee in lieu of a tax. Having to pay both would eventually hurt the overall economy. You know, the big picture in all this.”

    You may have a problem if you were to raise that point with the state of NY. Since paying sales tax is not a new law. NY consumers were supposed to be paying tax all along. The burden of collection just shifted from the consumer who was supposed to self report and pay to out of state retailers.

    “Where do all the others stand? ”

    Many merchants found out late and many are just finding out now. Lots of merchants are dropping NY affiliates like Overstock did and lots are taking the tack Amazon did and letting NY affiliates know that they won’t be terminated and their agreements will continue.

    I think many this week are just talking to attorneys and trying to figure out what to do. I sure would not want to be in their shoes trying to make a decision on this. It has to be hard no matter how you cut it.

  17. Linda, my point on the 3400 is that while they are “technically” an affiliate most are stale affiliates who have no reliance on the monies they make from Overstock.com. By ignoring the secondary comments made by Overstock that only a few generate any real income creates a picture that is not real. There are not 3400 affiliates in NY generating great revenues for Overstock or great revenues for themselves.

    NY Generates revenues in many different ways – including the revenues of shipping costs. Reducing on-line sales because they are no longer cost competitive will reduce the shipping volume and thus reduce the need for delivery venues. A purchase on-line is typically done weighing convienience and cost. taxes on store purchases can, in many cases, offset the cost of shipping by an on-line service. Thus convienience comes into play. Once taxes and shipping are additive to the on-line purchase it makes on-line less competitive.

    As for the state of NY – they are crooks. I would never live in NY based on the way the State expects people to pay for the Governments mismangement of funds.

  18. I just found Patrick’s reply over at AffiliateTip which was made on the 27th according to Discus. He said they only have 200 active affiliates. But again at the time I wrote this post on May 16 the only number Overstock mentioned was 3400.

    Here is Patrick’s rebuttal to a Geekcast show discussing this issue. See comment #1.


  19. that is correct Linda.

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