The likely effects of all this are far-reaching. New York is likely to see a fall in tax revenues because so many New York businesses that were paying taxes on the earnings they made from paid referrals are no longer going to be making those earnings. Many are expected to simply go out of business. For those companies that do register, there will be another layer of bureaucracy to comply with and back-end software for their web sites will have to be upgraded to cope. Consumers will switch to retailers who have no affiliates in the state and who are thus exempt from levying sales tax.
However, the real cost will come if other states follow New York and introduce similar legislation of their own. Then the cost of doing business online will skyrocket as retailers bear the cost of maintaining compliance with differing tax schedules from state to state. Then, of course, there is the international dimension. The European Union has already dealt with this issue. We already pay VAT on our online purchases if the retailer is also EU-based. I have even found myself paying VAT on software I have downloaded from an American vendor. If this nonsense continues, retailers will have to master a plethora of tax regimes in a multiplicity of languages in order to stay in business.
The potential of the Internet is being seriously undermined. What scientists originally built, the taxman is take apart.
Online retailers across America are struggling to come to terms with a new New York State law that requires them to register and collect taxes on sales into the State if they have affiliates there. Affiliates in this instance are sites that have links to retailers such as Amazon that earn them a small commission on any sales they generate. Lots of places carry these small ads, you see them everywhere even on the most prestigious sites. But if that affiliate happens to be based in New York, this new law kicks in, whether or not they are based in New York.