• by Wendy Davis  @wendyndavis, September 9, 2009

The Performance Marketing Alliance has joined Amazon and Overstock in asking a New York appellate court to nix a new state tax law.

 

The so-called "Amazon tax," enacted last year, requires any online marketer who uses affiliates in New York to collect sales tax from consumers in the state. Amazon and Overstock contend that the law is unconstitutional on the theory that it interferes with interstate commerce.

Late last week, the Performance Marketing Association weighed in with a friend-of-the-court brief that asks a New York appeals court to strike down the law. New York Supreme Court Judge Eileen Bransten had earlier rejected a challenge to the law.

Amazon and other opponents to the law argue that a 1992 U.S. Supreme Court decision prohibits state governments from requiring retailers to collect sales tax unless they have a physical presence in the state, like a brick-and-mortar store. The challengers say that online affiliate marketers -- including other Web publishers that garner referral fees because they have placed links to Amazon on their sites -- don't constitute a sufficient presence in New York to justify the tax.

Rebecca Madigan, director of the Performance Marketing Association adds that the laws place administrative burdens on e-retailers by requiring them to factor in consumers' locations when calculating prices.

Since the New York requirement went into effect, an estimated 200 online retailers, including large companies like Overstock and Blue Nile, have stopped working with affiliates in the state. The result has been a significant revenue drop for the estimated 15,000 New York affiliate marketers, Madigan says. "We believe it has put thousands of affiliates out of business," she says. "If the goal of this legislation is to increase state revenue, then putting these local companies out of business and requiring them to find new jobs in this economy, or rely on state aid, seems counterintuitive."

Amazon has not dropped New York affiliates, but did stop working with affiliate marketers in North Carolina and Rhode Island, which also recently passed similar laws.