Overstock.com Cancels N.Y. Affiliates to Avoid Sales Tax

NEW YORK -- Overstock.com has become the first major Internet retailer to cancel its relationship with affiliates in New York to avoid paying an Internet sales tax, The New York Times reported on its Web site Thursday.

Affiliates are Web site owners who get commissions for referring customers to an online store. They are important because New York State is requiring any company that has an affiliate in the state to collect sales taxes on its behalf. Until now, companies had to collect taxes only if they had a physical presence, such as an office or factory, in the state, The Times Web site reported.

“We believe the law is unconstitutional and won’t stand the test of the courts, but in the meantime we have been very careful to keep our footprint just in Utah,” said Jonathan Johnson, Overstock’s senior vice president for corporate affairs, The Times Web site reported. “We can’t afford to have our New York affiliates up online if it subjects us to New York sales taxes.”

The company’s goal is “showing the New York governor and legislature that this is bad for New York businesses,” Johnson said, The Times Web site reported. “There are affiliates in New York who will see their business go away because of a not-so-thoughtful action by the New York State legislature.”

Johnson said Overstock has 3,400 affiliates in New York state, though not all of them are active, The Times Web site reported.

-- NYSSCPA.org News Staff

Posted on 5/15/08