New York State of Mind
Seminar breaks down the implications of New York’s new Internet tax law
May 2008 By Joe Keenan, senior associate editor, Catalog Success
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This process can also be very time-consuming, Isaacson added. Furthermore, the case will have to be decided in state court, not federal, per the Tax Injunction Act, which says federal courts don’t have jurisdiction to state tax challenges. There’s also no criteria in this law as to what you have to prove, which makes a legal challenge difficult, Isaacson said.
3. Register your business for voluntary tax collection prior to June 1. Why June 1? Because there’s a grace period, or amnesty, for all businesses until June 1 of this year. If your business isn’t registered by this date, you then become eligible for an assessment back to April 15 of this year, when the bill was signed into law. If registered prior to June 1, you’ll be protected from back-tax liability up to that point as long as you’re meeting the current restrictions.
* This new law doesn’t apply to all direct marketers, Isaacson noted. Those out-of-state merchants who don’t reach a threshold of $10,000/year (includes shipping and handling fees) in New York sales from these link or referral arrangements are exempt from the law. This threshold is determined retrospectively on a quarterly basis, Isaacson said. So every quarter you need to look back and see if you’ve reached the $10,000 threshold to determine your liability.
* In response to a question from Kent Knoll of Omaha Steaks on whether a space ad in the New York Times would create an affiliate relationship with someone in New York, Isaacson answered that there’s no legal authority for space ads to create legal nexus. He further advised the audience that to get as low a risk as possible, avoid performance-based advertising, which is more closely tied to affiliate relationships.
* Echoing a concern of many, Paula Beck, CFO of Country Curtains, and Darryl Scott, president of Venus Swimwear, each inquired about affiliate relationships between search engines such as Google and Yahoo and their businesses. Isaacson responded that under the statute, both are considered New York businesses since they’re doing business in New York state. And buying keywords and pay-per-click arrangements with these companies would make you liable for the tax.
* Conduct your own nexus self audit, Isaacson advised. “Any relationship where you’re interacting with an in-state company should be scrutinized,” he said.
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