Affiliate marketing arrangements that don’t involve performance-based (i.e., sales commission) compensation won’t create a tax collection presumption. In that case, there’s no need to present information to rebut a presumption of tax collection responsibilities.
The TSB also specifically provides that this presumption doesn’t arise “where the consideration for placing the link on the Web site is based on the volume of completed sales generated by the link.” As an example, the bulletin refers to the situation where an Internet marketer pays “a set fee based only on the number of clicks on the link to [the Internet marketer’s] Web site, whether or not sales are made.”
2. Rebutting the presumption of a tax collection obligation.
The most significant provision in TSB-M-08(3)S is that a remote seller can rebut the presumption that a New York-based Web link gives rise to a tax collection obligation if the retailer can prove that there’s no additional solicitation activity.
So unless there’s some additional solicitation activity that occurs in New York by the site owner, the link alone won’t be sufficient to impose a tax-collection duty.
The TSB presents two examples with different outcomes showing this requirement. First, if the Web site owner distributes flyers in the state promoting the presence on its Web site of links to the out-of-state retailer, then the presumption can’t be rebutted and the out-of-state retailer must register for sales/use tax collection.
In the other example, however, where the link on the New York Web site isn’t promoted “through the use of flyers, newsletters, telephone calls or e-mails,” the presumption of “vendor” status created by the presence of a New York Web site link can be successfully rebutted and no registration or collection is required.
The relatively restrained position taken by the Department of Taxation and Finance is critical to direct marketers. It means, if retailers are vigilant about their affiliate relationships, then the mere maintenance of a link relationship shouldn’t require use tax collection. But if a more extensive relationship exists with an affiliate marketer, then use tax must be collected on all sales to New York consumers — not just those referred through the affiliate Web site.