Q: How should a merchant new to affiliate marketing approach the New York nexus law?
A: First of all, for anybody not familiar with this topic, it’s also known as the affiliate tax or Amazon tax. The essence of the law is that any company with affiliates in New York state is considered to have a presence in the state and subject to charing sales tax on any purchase from a New York resident.
I would recommend that you not boot out affiliates living in New York, as some companies have done. This sort of kneejerk reaction may or may not impact purchases from New York customers, but it will definitely have a negative impact on your reputation among affiliates.
After all, even if I am not in a state that currently has such a tax, there is always a chance the same sort of legislation could come in the near future. So, if I see you removing affiliates due to this sort of law, I am going to be less inclined to promote you, since I figure I could be kicked out after doing a lot of work to make sales for you.
Also, if the New York law catches on elsewhere, as it seems to be doing, we may well be in a situation where most states have a nexus law. In that case, you’ll either have a shallow pool of affiliates to partner with or you’ll try to re-recruit the same affiliates you recently alienated in the affected states.