Taxation Saga Continues — Overstock.com Drops New York Affiliates

May 15th, 2008

We wrote earlier about the “Taxation Problem” New Yorkers are facing with Amazon. The state enacted a law that requires Amazon affiliates residing in the state to pay sales tax. Amazon subsequently brought the issue to court challenging the law which was supposed to bring about $50 million to the $122 billion state budget recently signed by Gov. David A. Paterson.

The law of course doesn’t apply only to Amazon affiliates, any merchants that reside in New York and have affiliation with an out of state company will be required to pay sale tax come June 1. We just learned that Overstock, another big online retailer, is taking the issue to heart. Instead of fighting it though they chose to vote with their money and recently sent an email to all the affiliates residing in New York effectively terminating their agreement with the company.

It sounds like these events precede a bigger storm around online taxation. States are known to follow each others’ steps just as other merchants might choose to abandon states enacting these laws. This can’t be good either for merchants or states, nor it is good for the consumers. Our guess is it all will depend on how the issue plays out in the courts for Amazon in the upcoming months.

Source: NY’s “Amazon Tax” Takes First Casualty: Overstock Affiliates at TechCrunch

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