Consumer Backlash Over New York Affiliate Tax Could Hurt Us
Sorry, I don’t really have time for lots of commentary on this, but if you are involved in or affected by the New York Tax issue you need to be following the latest really detailed conversation that’s developed in my last post about the tax issues. Dozier Internet Law: 10 Tips for New York Affiliate Tax Problems… Be sure to read the comments!
I’ll just throw a couple quotes at you here, but you need to read the comments in chron order.
Comment #4: “This morning’s media has news that consumer groups are now calling on retailers to ditch affiliate programs in New York to protect customers from the forthcoming sales tax. Newegg, Amazon, and Buy.com are all under pressure to temporarily suspend affiliate programs…”
“The media narrative is very simple – who does the retailer value more – the end customer or the independent affiliate who is earning a percentage of revenue based on sales? The inevitable consumer backlash is against the retailer, especially when Overstock…”
“Greedy affiliates willing to throw consumers under the bus is why consumers are now telling retailers to throw affiliates under the bus.“
Many of the big “deal forums“, most of which are run by affiliate marketers have consumers up in arms over Newegg’s decision to back their affiliates and see it as a move AGAINST Newegg’s own customer base. As more large etailers decide to charge tax, we may see more consumer backlash and more consumers pushing for retailers to drop their NY affiliates.
Kevin and I go back and forth citing reasons why if affiliate marketers “join forces with the NY CONSUMERS who are also fighting against this law, maybe we’ll get somewhere.” IMHO there is power in numbers and it’s the voters of New York that count! I don’t think the opinions of a bunch of “rogue” affiliate marketers and bloggers from outside the state count for much with the politicians that made this law.
Additionally in comment #8 I have an update about this: “A group of industry leaders and I are in direct communication with Jim Connolly, Staff Attorney in the Office of Counsel to the Tax Department of the State of New York.”
Keep your eye on the comments on that blog post, since important new info keeps surfacing there. Merchants especially need to read this, so you aren’t blindsided by what I’m afraid may happen this week.
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#1 Nate Nead wrote on Tuesday, May 27th, 2008:
This does not bode well for the immediate future of affiliate work. Something’s gotta give though for the long term viability of it all.
#2 Phillip Dampier wrote on Tuesday, May 27th, 2008:
I met with a few people locally and also spoke with some interested folks down in Albany, Buffalo, Syracuse and NYC about what exactly the time frame is supposed to be on this lawsuit, and what exactly other merchants and interested parties are doing about it. I also had a response from one of our state legislators regarding this issue.
The bottom line, as of today, is that the Amazon suit is not scheduled to be heard for some time. The current plan is to begin implementing the tax plan on schedule. To date, no other merchant we can find has filed a lawsuit or attempted to obtain a temporary restraining order regarding this matter pending Amazon being heard in the courts. They have the most to lose in this and they have honestly not ponied up the necessary resources to resist this, preferring a wait for Amazon and see approach, which is frankly not acceptable.
The state legislature feels this issue is not yet drawing enough protest for them to get directly involved. In fact, outside of Amazon, they have really not heard from any merchants or affiliates in any formal way. They are mostly hearing from consumers.
With all of this in mind, and the fact that to date most of the affiliate lobbying that we’ve noticed is currently directed at retaining affiliate programs at the expense of NY consumers, we are forming our own group solely representing the interests of New York state consumers.
The goal of the group will be to advocate the immediate suspension of affiliate programs for New York-based websites unless/until there is success in any of these actions:
1) A successful TRO that prohibits NY from imposing sales tax on interstate merchants that currently do not do so for NY state residents.
2) A successful outcome of the lawsuit.
It was our consensus that most of the discussions we have noted thus far from affiliates currently are focused on retaining affiliate programs, even if it results in sales tax imposition on New York residents. While we all agree the sales tax rule change is a bad thing, the means to the ends are currently incompatible between affiliates and consumers. You have your priorities, we have to have ours.
We also determined that with no evidence of any truly organized effort by a merchant or affiliate trade group to attempt to file for a TRO, or join legal action, merchants are not taking this situation sufficiently seriously, and it is imperative to educate consumers within New York about exactly why this tax is being imposed, and that in virtually every case, the merchant can make changes to their business model to avoid having to impose such taxes.
Some merchants have taken the issue more seriously after customers dismiss their early claims that their hands our tied by letting them know we are perfectly aware of their affiliate programs and why they are important to this matter. We have decided to provide them with step-by-step instructions on how to temporarily suspend any affiliate programs for New York-based websites pending either a TRO or a positive outcome to the Amazon lawsuit.
The legal template being offered to merchants comes from those drafting the termination notifications for Overstock and other companies.
We will be spending the next several days compiling a list of the major online retailers and attempting to determine the paths they are choosing to take. Those intending to impose state taxes will hear from us. Clearly, the competitive situation between those companies imposing tax with an affiliate program and those who will not because of the lack of one is a compelling argument for consumers to make who shop on bottom line price, and many are doing so independently.
What frankly drives us at this point is the calendar. It will be easier for us to protest any attempts by merchants to simply cave in to the state before they do so instead of after. Merchants must hear from consumers because they must be willing to counter the natural inclination that some merchants might have to simply continue to profit from affiliate programs, even at the expense of consumers in this state, and inevitably those in others should this new tax formula spread.
(Linda moved this comment from Phillip that was in the wrong blog post to keep all NY tax info together. Copied from this blog post )