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New York unfair tax on affiliates
New York is a great place I'm sure, and famous for many things. It seems beyond sensible belief that a place as well clued-up a business centre as New York, should do something approximating to economic suicide by putting a tax on affiliates that live in that region. At a time when places are keen to compete with each other to be the best tax haven and to attract the most business, New York has introduced a bizarre form of "sales tax" which unfairly prejudices people who are in the affiliate business, in New York!
Although initially the tax may have seemed a sensible idea, to grab more money, the result is likely to be a disaster. For one thing, affiliates are likely to leave New York! Like the business of escape to a tax haven, affiliates will up-sticks and migrate to other places. Also, affiliate merchants are unable to levy the tax on New York affiliates and so they are in effect ceasing to allow New York affiliates on their affiliate programs! One of the first companies to do this was Amazon. They said that no-longer would anyone be allowed to be on the Amazon Associate Program if they lived in New York.
As well as being Not Fair, it's also economically disastrous, as it will put New York at a severe disadvantage financially. That's not to say the place will go broke, but it will almost certainly end up losing a lot of money because of it. It's not just money it will lose, but folks too. As with the Tax Haven situation, once people have emigrated and escaped, they generally don't come back! People vote with their feet (like the way people are leaving the UK!), and then the places that have too much tax are left without some of the most prosperous people.
Here are a few other websites that have something to say about the New York Tax:
http://blog.affiliatetip.com/archives/new-york-affiliate-tax-recap/ - now LinkShare isn't happy about it!
...and others to be added.
Really, the folk who make up the laws in New York should reconsider and repeal this absurd law, because if not it will come back to bite them, for sure.
Ooh look, here's another US state, Rhode Island, looking like committing economic suicide as well!...
...so admittedly this is sad for affiliates who happen to live in Rhode Island, but the people who will really miss out are the people who run Rhode Island. They've put their own economy at a disadvantage. This type of thing is like Nevada deciding to ban gambling. Such a move would not be good for the local economy there. It would turn Las Vegas into a ghost town.
Other States attempting to introduce this disastrous legislation... North Carolina, shame! However, California, Hawaii, and Tennessee escaped the problem as their respective governors vetoed the law and so now those states CAN have affiliates, and will continue to have a flourishing affiliate market sector!
Companies ditching tax-disaster states include the obvious Amazon, but now also the LinkShare affiliate network, and Overstock (Overstock ditched the problem locales pre-emptively, even before the legislation was passed).
In a way the problem of imposing local tax on affiliates is a bit like the regional assumption, because it represents a failure to understand that The Internet is The International NET and is visible across the world in a global economy.
Update 2011: Incredible as it may seem, California has introduced affiliate sales tax. Legislators seem to believe that somehow they'll successfully extract millions of dollars because of this, but if they believe that then they are deluded. The fact is that affiliates will leave the state. Even if it were just the affiliates of Amazon who were leaving, it would lose California 152 million dollars in tax immediately (according to the Performance Marketing Association). Well, the legislators might say, affiliates won't leave the state. Naive. What happens, and it's happened before, is that Amazon says "We do not accept any affiliates in California, New York, or Rhode Island".
At a stroke, the tax problem is solved, and no tax can be extracted by the greedy legislature. However, by doing this the regime has shot itself in the foot and lost all the income tax it would have got from the profitable affiliates, who will now be elsewhere.
The arrogance is scary and suggests potential Doom, because if they ignore facts as obvious as this, they may also try to ignore asteroids and tsunamis, the outcome being dire and predictable.
Update 2012: The list of states to commit fiscal suicide by introducing "Amazon Tax" is now as follows... Arkansas, Colorado, Illinois, North Carolina, Rhode Island, and Connecticut, (although oddly New York, which first introduced the stupid tax in the first place, seems to be no longer on the list!?).
These states now have a total of ZERO affiliates, and so the tax income from affiliates there is... ZERO.