Washington Journal of Law, Technology & Arts


Affiliate marketing has become a popular and profitable way for online merchants to access potential buyers, especially where those merchants lack a physical presence in the buyer’s home state. By increasing market penetration and brand recognition, affiliates have contributed to the growth of e-commerce and, consequently, the growth of untaxed electronic purchases. As a result, affiliates recently became the focus of states looking to capture lost sales tax revenue from online sales. In 2008, New York became the first state to target affiliate marketing programs with a tax amendment that requires out-of-state vendors that solicit more than $10,000 worth of sales via commissioned in-state representatives to collect and remit state sales taxes. The statute survived a Federal constitutional challenge at the state court level in Amazon.com v. New York State Department of Taxation and Finance. However, many questions still remain regarding the implications of the new state law and the future of tax-free affiliate marketing in the many states considering similar taxes. This Article explores the enacted and proposed tax amendments and how businesses can adjust their affiliate marketing programs to minimize responsibility under the new requirements.

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