The Amazon Law

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.

There is a sting in the tail too. If a retailer fails to register by the 1st June, they will be pursued for back-taxes from previous years. The legality of retroaction as well as the basis of the new law itself is being challenged through the courts by Amazon, amongst others. The new law is informally referred to by state officials as "the Amazon law," no wonder the company feels that it is being singled out. The other response from retailers has been to sever all relationships with any affiliates in the state. It means they are able to continue to sell into New York without levying sales tax. [Click "Read More" to continue reading]