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My Response to the Newegg Affiliates Program Changes

Disclaimer: Legal issues are discussed in this article. I am not a lawyer and the analysis may or may not be accurate. Seek legal advice for help with legal issues.

Please read the companion article at Tech Republic, Do Webmasters need to add lawyer and legal counsel to their job description?, for how the New York State sales tax law change impacts Webmasters.

I used to have a banner for the online computer and electronics parts vendor Newegg on my Website. I was a proud participant in Newegg's affiliate program until I decided to cancel my Commission Junction account due to their $10 service charge policy.

Remaining a Newegg affiliate became a lot more complicated beginning on August 14, 2008. I received an email from Newegg, sent to me via Commission Junction. Commission Junction is the third party that operates Newegg's affiliate program. The email requested me to login to my Commission Junction account and read and accept or decline a Special Terms and Conditions agreement.

I did so. I found the Special Terms and Conditions agreement to be confusing and I wasn't sure how I would comply with it. To be honest, I did not read it very carefully. I saw that I would have to sign a yearly affidavit stating that I was not soliciting to New York residents. I declined the new terms. I was no longer a Newegg affiliate. I immediately removed all Newegg banners from my Website.

I did this with no pleasure. I have high respect for Newegg and how they do business and was honored to have their banners on my Website. I fired off an email to Tommy Chang, the contact person who had sent out the original email notifying me of the change. I noted the reasons I declined the terms in the email.

I was somewhat surprised when I received an email back from him. He stated that he could not offer legal advice but included links to two New York Technical Service Bulletins TSB-M-08(3)S and TSB-M-08(3.1)S which try to clarify the law. I was confused by the whole nexus and New York issue and told Tommy this. I also told him that the real clincher for me was the yearly affidavit requirement. Apparently I wasn’t the only one who had issues with the new requirements because Tommy told me later that day that Newegg had modified the terms.

I reviewed the new terms later that night as well as the two New York Technical Service Bulletins. The new terms clearly delineated the difference between a New York nexus affiliate and a non-New York nexus affiliates. A definition for nexus was included in the new Special Terms and Conditions. It appeared that since I do not reside in New York, do no business with anyone residing in the state of New York and have no connections to anyone doing business in New York I was not a New York nexus affiliate. The only question I had was whether my Web hosting company Dot5Hosting had their servers in New York or any facilities in New York.

I sent an email to Dot5Hosting's support team and soon received a response that their servers are in Arizona and they have no facilities in New York. I was now confident, though not entirely sure, that I met the conditions for being a non-New York affiliate and could agree to Newegg's Special Terms and Conditions.

I logged into my Commission Junction account and accepted the Special Terms and Conditions agreement. I was immediately accepted as an affiliate. I added the Newegg banners back to my site.

I went back about a week later to get a different banner, a promotional banner, and found that the status for Newegg was 'Advertiser Expired'. Huh? I tried to rejoin the program and agreed to the Special Terms and Conditions one more time but received an error.

I tried it again with the same results. Apparently, my affiliate status with Newegg had been automatically expired, though I thought I had successfully rejoined the Newegg affiliate program.

Later that evening I logged back into my Commission Junction account and saw that there was one offer pending my approval. I clicked on the link and there was the Newegg offer waiting my review. I was able to accept the Special Terms and Conditions and, hopefully, I am done with the Newegg Special Terms and Conditions, until next year.

I have since reread the Technical Service Bulletins and TSB-M-08(3)S states that the presence of a Web server in New York with advertising does not make the vendor a New York vendor. At least that is how I read the TSB. I have also since discovered that an affidavit is a special legal document that requires a Notary Public or authorized legal agent to witness the signing of the affidavit document. I am pleased that Newegg has changed the 'Affidavit' requirement to a 'Certification' requirement.

Editorial Privilege

If I were a New York affiliate as defined by the New York State law I would have had to decline Newegg's additional terms. I don't see how I could not solicit New York State residents. I would not however be angry with Newegg. I would be angry with Eliot Spitzer, David Paterson and the state of New York.

As ugly as the legal terms and requirements are I, for the most part, support Newegg and their actions. My only concern is the possible additional liability that the terms put on Newegg's affiliates. I am concerned that some Webmasters will not fully understand and comply with those terms. What happens if a violation of the terms is knowingly or inadvertently made?

I can only hope that someone in the state of New York comes to their senses and rescinds the parts of the tax laws linking affiliates to vendors. That isn't likely to happen according to Linda Buquet at the 5 Star Affiliate Marketing Blogs. The best hope for New York affiliates may be in the pending Amazon and lawsuits. A state has a right to collect taxes. This however is a breach of a well established custom and clearly challenges the precedent setting Quill Corp. v. North Dakota, 504 U.S. 298 Supreme Court case.

Does it make any sense whatsoever that a Webmaster in the state of Arizona has to spend one second of his time having to worry about whether New York is extracting their state sales tax from online vendor sales to New York residents? The fact that the New York tax law is bad for business is an understatement to say the least.

I won't be doing any business with any person or company in New York. And if Newegg's affiliates accept Newegg's Special Terms and Conditions, there are thousands of other Webmasters like me who won't be doing business with New Yorkers either.

Additional Resources

NYAffiliateVoice - Impact of the NY Tax Session at Affiliate Summit The Affiliate Summit was held on August 10-12, 2008 in Boston. A ‘solution’ to the New York tax law change was presented.

NYAffiliateVoice - Two Steps to Comply with Tax Law The two simple steps that vendors can follow that will allow New York affiliates to remain part of their affiliate programs.

Business on SQIDOO - New York State Sales Tax Negatively Impacts NY Affiliates

AbestWeb – NY Tax Law and NY Affiliates

FreeAdvice - Free legal advice

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