New York state’s legislature recently passed a law declaring that any company with affiliates in New York must collect sales taxes on purchases made in that state, effectively inventing sales tax nexus out of thin air. This was the budget balancing brainchild of now humiliated former Governor Spitzer, and unfortunately, his successor pushed the bill along and got it passed.
Under this law, Amazon or Ebay or whoever must collect and remit sales tax, and file the appropriate paperwork for every sale they make to a New York state resident/business. Given that every town, county and who knows what else has their own little sales tax, keeping track of this and reporting it is a nightmare.
Numerous pundits on the net predicted that companies with affiliate programs would start tossing out all the NY-based affiliates. Some thought those predictions were a joke, but it was clear to me that it made perfect sense. Plus it would be a great way to tell NY where to stuff it.
So this week, Overstock.com became the first (known) major internet commerce site to terminate the contracts of all affiliates in New York State.
The law of unintended consequences is one that misguided legislators cannot help but violate.