DMA Politically Direct (Summer 2008): New York Clarifies Affiliate Sales Tax Law

August 27, 2008 — As the enforcement date of June 1, 2008 approached and passed the New York State Department of Taxation and Finance issued two Technical Services Bulletins (TSB) clarifying the Affiliate Sales Tax Law, specifically explaining who would be required to collect New York sales/use taxes.

Through this clarification, the Department of Taxation and Finance stated that the presumption of the requirement to comply with this New York law may be rebutted, as long as the remote seller or affiliate engages in no additional solicitation activity other than the providing of a link to another website.

To satisfy these requirements, or to rebut the presumption, the TSBs require that the seller provide written affiliate marketing agreements that include explicit language barring any marketing efforts beyond simply linking the websites.

Additionally, each year all resident representatives or affiliates must provide the seller with “a signed certification stating that the resident representative has not engaged in any prohibited solicitation activities in New York State . . . at any time during the previous year.” This certification is subject to audit by the NY Department of Taxation and Finance. However, so long as the remote seller accepts the certification in good faith, it does not need to verify independently the information provided by the affiliate marketer.

On June 24, the New York State Senate voted to pass a bill repealing the section of the previous tax law relating to the presumption of sales and use tax when a seller uses residents of New York to solicit sales.

The bill is now in the Assembly where it has been referred to the Ways and Means Committee. The Assembly is currently in recess, and expected to return in October. However, due to the nature of this bill and its sponsorship and passage through the Rules Committee in the Republican controlled Senate, the likelihood of its passage through the Assembly is difficult to predict. The bill currently lacks a sponsor in the Assembly, where the Democrats are in the majority.

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