Amazon Sues NY Over Taxes; Are Affiliates ‘Affiliated’?

We’ve all used Amazon before—but if you’re living in New York, a new(ish) law says you’ll have to pay New York sales taxes on purchases from the Seattle-based Internet retailer. Don’t worry, New Yorkers, you’re not the only one incensed: Amazon is already challenging the law.

Reuters reports that the new law, which Amazon believes is “unconstitutional, vague and overly broad,” dictates that any business selling goods with a presence in New York—including Internet-based affiliates living in New York—will have to pay New York sales tax. Or, as Reuters puts it:

Through its “Associates Program,” the company pays unaffiliated Web site operators around the country a commission if they advertise Amazon on their sites. Those ads often allow consumers to click through from the advertiser’s Web site to Amazon.com.

The new law presumes that this amounts to solicitation of business in the state, a claim Amazon denies. Amazon has no “substantial” physical presence in the state, and independent advertisers are not authorized to act as Amazon’s agents, according to the company’s complaint.

Of course, this leads to a diction problem in general: the standard term in the industry is “affiliate,” despite all of Amazon’s pages which really do say “Associate.” Back when I worked in an agency, we used to explain affiliate marketing as being akin to recruiting commission-only sales agents throughout the Internet.

But I do have to say that I think Amazon is in the right here: they’re not actually sales agents. Yes, they happen to make a few cents off each sale from someone who clicked through their site, and yes, Amazon pays out these affiliate checks to people who happen to live in the state of New York.

But these affiliates’ (okay, associates’) sites are actually a lot more like billboards than sales agents. Does everyone who advertises on a billboard in the state of New York have to pay New York sales taxes, even if they’re not actually located in New York?

Clearly, the issue here isn’t quite so cut-and-dried, and of course, given the industry that we all work in, our opinion is obvious. Who can make the best argument on behalf of the state of New York (aside from their Solicitor General)?