Industry News

Affiliopolis Breaking News: New York Online Sales Tax

In an interview today, Cecily Lancit, President of Affiliopolis.com Affiliate Network, spoke with representatives of the New York State Tax department about their new online sales tax legislation. Present on the conference call was Jim Connolly, Staff Attorney in the Office of Counsel to the Tax Department of the State of New York; Dan DeSilva, Sales Tax Publications and Memos Unit; Dan Wood, Office of Tax Policy; and Ken Brand, Publications Bureau.

The group referred to 4 important reference documents that people might want to read carefully:

1. A reference document prepared to explain the legislation.
http://www.nystax.gov/pubs_and_bulls/memos/sales_memos.htm
On the left hand side, Click on TSB-M-08(3)S, which is the explanatory document on this legislation.

2. A reference Guide to Sales Tax in New York State
www.tax.state.ny.us/pdf/publications/sales/pub750_208.pdf
This document outlines what goods and services are taxable. Take particular note of a short line on page 19, referring to "providing certain information services." According to follow up on this item in the conference call, selling consumer contact information is considered taxable and collectable if sent by a NY web publisher and received in New York by their client. The NY web publisher is considered a "merchant" and responsible for reporting and collecting the tax if they sell more than $10,000 worth of data delivered in New York to New York data purchasers. If the data is sold by a web publisher outside of New York, then the purchaser of the data in New York is responsible for reporting that purchase and the ensuing use tax. If the data is received in New Jersey, for example, then no tax is due to the State of New York.

See more interpretation on this topic in document 4, an advisory opinion on taxability of email lists.

3. Where to register for a Sales Tax Certificate of Authority:
http://www.nys-opal.com/  (click the "’on-line applications" link on the lefthand margin and go from there.).
Take note of the fact that once a merchant or web publisher has registered, then they are responsible for collecting tax on any taxable sale shipped into the state of New York." The inference here is that once a merchant has registered to pay sales tax, then reporting from affiliates is moot - the merchant is then going to have to charge tax for every sale made in New York, whether it comes from a web publisher or their own website.

4. Advisory opinion on email lists and their taxability:
http://www.tax.state.ny.us/pdf/advisory_opinions/sales/a07_13s.pdf

This document is a reply to a Petition for Advisory Opinion from NetCreations, Inc. on whether its charges to clients for email addresses are taxable. VERY interesting reading.

5. Advertisers vs. Web Publishers:

Aside from these important resources, there were discussions on the call that can shed some light on the law's interpretation of who is an advertiser, and who is a publisher.

An advertisement, which is a "passive, paid message,"and exempt from this law, is differentiated by the State from the very different and very much liable "commission- based or success -based fee." "For example, if payment is based on clicks, or views, and no sale has to be made for payment to be received, then it is not considered a nexus point," say the NY experts.

If there is a success fee, or commission, then web publishers are considered "sales reps" and the definition of "nexus" has been met; then there is liability for the merchant to register with the State and to collect and pay tax to the State. (See example "G" in TSB-M-08(3)S)

6. To Register or Not to Register:

Also of interest is the group's answer to the question, "If a merchant does not register, how can you know they are doing such business in New York?"

Apparently there is a "general audit program" that specializes in discovery, and they have a variety of tools they use to check on these things. Merchants who do in excess of $10,000 through NY "nexus" points and who do not register "are playing the audit lottery," according to the Tax experts. "There is no statute of limitations for merchants who qualify and do not register and who do not file sales tax returns in New York. In a tax audit, the State can go back "as far as there is nexus" and assess hefty tax, penalty, and interest on that merchant," they say. Amnesty from historical sales tax liabilities are issued to merchants who sign up by June 1.

7. What's Next?

In an effort to be as helpful to the industry as possible during a time of clarification, the group agreed to my request to meet with a small group of industry leaders next week to develop an FAQ that could be accessible via the web. As those of us in the industry continue to examine these documents and pose the next level of questions to the State, Affiliopolis will keep it's eye on the ball and make an effort to keep everyone informed.