[MichaelColey]

After listening to the DMA call, I realized that there was something we were all missing (except Brian). On the call, they pointed out that the TSB (http://www.nystax.gov/pdf/memos/sales/m08_3s.pdf) doesn't say that merchants automatically have a nexus if they have sufficient affiliate sales in NY. It only changes the PRESUMPTION. That shifts the burden of proof. Instead of the state having to prove that the merchant has nexus, the merchant has to prove that they don't.

Reading on in the TSB, it states A seller may rebut the presumption that it is soliciting sales in New York State through resident representatives. For purposes of administering the new presumption, the Tax Department will deem the presumption rebutted where the seller is able to establish that the only activity of its resident representatives in New York State on behalf of the seller is a link provided on the representatives’ Web sites to the seller’s Web site and none of the resident representatives engage in any solicitation activity in the state targeted at potential New York State customers on behalf of the seller.It takes further in-state solicitation beyond the web site! It's not all roses, though. It goes on to give examples of what would be considered in-state solicitation: "flyers, newsletters, telephone calls or e-mails to club members or any other means of solicitation in the state targeted at potential New York State customers".

The prudent thing for merchants who are anywhere near the $10,000 threshold to do appears to be:

1) Amend their affiliate agreement to restrict New York affiliates from doing any solicitation of New York customers through offline methods, newsletters, emails, or PPC.
2) Enforce those restrictions.

For the record, I'm not a lawyer and this isn't legal advice. You'll definitely want to run this all by YOUR LAWYER.

[Kevin]

I read (heard) this:

1) Amend their affiliate agreement to restrict New York affiliates from doing any solicitation of New York customers through offline methods, newsletters, emails, or PPC.

a little differently.

I thought George indicated that those activities were ok, so long as the marketing efforts were related to the promotion of the NY affiliate website, and not the promotion of the "remote merchant". (Remote merchant, for those of you not on the call, refers to a merchant outside of NY with NY affiliates).

In other words. if AmazingBargains were a NY website, you could still email your existing members about AmazingBargains, but not about a Nike coupon on Amazingbargains.

The same would follow for PPC.

But as you said, these are the nuances that should really be discussed with an attorney.

[MichaelColey]

You're right. I meant solicitation on behalf of the merchant. It's a very subtle difference. If a New York affiliate sends out a newsletter that mentions one of the links to the merchant, that's a solicitation on behalf of the merchant. (See example 5 and 6 in the TSB.) If a New York affiliate sends out a newsletter that says come to our web site to see the latest deals (without being specific), it's probably fine (but not all that effective). I think it's probably best to restrict it. Email is such a tricky situation anyway.

[Kevin]

Yes, you're probably right, unless the merchant wants to prove it's actively monitoring the wording of NY affiliate emails and PPC text.

This would be a broad leap however, in the language of the affiliate/merchant contract.

If I'm not mistaken, most contracts restrict the way in which a merchant can be promoted, and not necessarily the way an affiliate website can be promoted (not 100% accurate, but I hope you know what I mean). While it's now being made necessary by law in the case of NY affiliates, that's a bit of a slippery slope as well, isn't it?

[7-days]

I participated in the conference call today and agree with Michael, this is an interesting look at things that the merchent has to prove they did not, instead of burden being on the state.

I thought the DMA call was very well organized and very helpful. I'm sorry I missed the first one, but will make sure I don't miss any of the future ones.

[Woodwind&Brasswind]

First, I'd like to be one of the solo merchants who express my frustration with this situation.
Second, does simply telling your NY not to do "other" marketing for you, mean you're free and clear? How would a merchant monitor offline activities of an affiliate?!

Sarcasm: I better not catch you on broadway and second passing out flyers for your coupon site with my bargains on them!

Sigh. Frustrated,

[MichaelColey]

The good news is that it appears far easier for merchants to comply without having to collect and pay New York sales tax. They basically just have to make sure that their New York affiliates are pure web affiliates, not doing in-state marketing to New York customers.

[MichaelColey]

Second, does simply telling your NY not to do "other" marketing for you, mean you're free and clear? How would a merchant monitor offline activities of an affiliate?!From what they said on the call, if you have it in your agreement and make a reasonable effort to enforce it, you should be fine.

[Kevin]

That's what you need to ask an attorney. :) Wish I had a better answer.

[Kevin]

oops. Guess Michael sees it differently. That's the fun part.

[MichaelColey]

Internet Retailer has an article that further clarifies this:

New York clarifies recent e-commerce sales tax law (http://www.internetretailer.com/dailyNews.asp?id=26525)The document hints that New York will be less aggressive than some originally feared, George Isaacson, tax counsel for the Direct Marketing Association, said in a recent conference call. ... online retailers engaged in “pure vanilla” affilate marketing programs with New York-based web sites—that is, the affilate is only hosting a link on its site and not marketing the link in e-mails, flyers, or phone calls to New York residents—can overcome the presumption of nexus in the state, Isaacson says.