Performance Marketing Alliance Moves to Reverse Unfair Tax Legislation Threatening New York Business Owners
Alliance Files Amicus Brief with New York State Supreme Court
NEW YORK – (September 9, 2009) – The Performance Marketing Alliance (www.PerformanceMarketingAlliance.com), the first not-for-profit trade association for the performance marketing industry, today announced the filing of a motion seeking leave to submit an amicus brief in support of Amazon.com’s appeal, which argues that the law requiring Amazon and other Internet retailers to collect use taxes on sales in New York (N.Y. Tax Law § 1101) based on their relationship with affiliate marketers is unconstitutional under the Commerce Clause of the U.S. Constitution (U.S. Constit., Art. I, § 8).
The PMA takes issue with the New York law’s classification of affiliates as creating a “physical presence” in the state for online retailers like Amazon, requiring retailers to collect use taxes on sales made through the advertising displayed on affiliate Web sites. Affiliates are individuals and businesses who agree to display advertisements on their Web sites for a given online merchant. They are paid when users click on those advertisements and take an agreed-upon action, such as a registration or a purchase.
The brief explains that affiliates provide a form of Internet-based advertising that is closely analogous to traditional print advertisements distributed by a catalog retailer, and do not constitute a physical presence for an ecommerce merchant in any state. Affiliates sell no products, collect no payments from buyers and make no deliveries. They have no further involvement in the sales and marketing process beyond posting the advertisement.
“Since its creation, the PMA has spearheaded efforts to persuade state legislatures not to adopt statutes like this discriminatory New York law, which threatens the livelihood of thousands of individuals and small business owners and has the potential to strangle ecommerce with invalid regulation,” said PMA founder and executive director Rebecca Madigan.
The brief maintains that the statute harms the public interest by punishing performance marketing, a highly efficient approach to advertising which has allowed thousands to make a living through electronic advertising on the Internet. Further, the revenue stream generated from performance marketing has allowed many small businesses and individuals to accelerate the development of their Web sites, facilitating the more rapid diffusion of free information to the public that is the hallmark of the Internet.
Since it passed in 2008, the New York statute has decimated the income of thousands of affiliate advertisers in the state as several large Internet retailers have terminated all affiliate agreements to avoid imposition of use tax collection responsibilities.
“I have more than 20 employees who are residents of New York, and my company generates a significant amount of income tax for the state,” said James Keating, vice president of marketing for ShopWiki.com, a New York based affiliate. “Unfortunately, the state won’t see that revenue since its new policy has caused out of state online retailers to discontinue using us as an advertising vehicle.”
Amazon filed its appeal on July 13, 2009, in the New York State Supreme Court Appellate division. The state of New York is expected to file a response by September 16, 2009.
About Performance Marketing Alliance
The Performance Marketing Alliance is the first not-for-profit, trade association for the performance marketing industry. The Performance Marketing Alliance was founded in 2008 by industry leaders to connect, inform and advocate on behalf of the growing performance marketing field.
Membership is available to those interested in shaping the strategic growth of the performance marketing industry. The membership application, and information on the fall membership special, can be found here.
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