A judge has dismissed lawsuits from Amazon and Overstock.com challenging New York’s “Amazon tax,” which was enacted last year. From the Associated Press:
The law applies to companies that don’t have offices in New York, but have at least one person in the state who works as an online agent — someone who links to a Web site and receives commissions for related sales.
In this case, “agent” is synonymous with “affiliate.” Amazon and other online retailers share a cut of revenue generated by affiliate referrals. If further appeals go against Amazon and, as expected, other states jump on the sales tax bandwagon, affiliate programs of all sorts could take a major hit.
The AP notes that the law applies to “companies that have $10,000 or more in New York sales.” There’s some confusion around this $10,000 figure — does it apply to companies that run affiliate programs (e.g. Amazon) and generate $10,000 or more in New York-based sales, or does it refer to affiliates who earn $10,000 through revenue share agreements? According to Law.com, the company that sells the products is held to the $10,000 standard. As such, a company could not skirt the law by cutting off individual New York-based affiliates before they reach $10,000 in referral sales. To avoid collecting New York sales tax altogether, companies would have to limit the combined income from all New York affiliates to less than $10,000.