Even though Congress has declared the Internet to be tax free nationwide, except in states where the seller and sellee both reside, New York has now proclaimed a legal loophole, citing what its tax department says is U.S. Supreme Court precedent regarding sales by "representatives" within state borders. In other words, if you manufacture widgets in Tennessee, but a representative of yours working in New York sells a widget in New York, it’s taxable in that state.
Now, by a cyberspacian stretch of money hunger, the New York Department of Tax and Finance has ruled that affiliate sites owned, operated or located server-wise by people residing in New York can be taxed for their transactions. If, for instance, you have a personal blog in the Empire State and you put up an Amazon banner and sell a book or two, Amazon must collect tax and send it to New York even though Amazon is not located there.
How they plan to track all these transactions is beyond me, but the sheer audacity of this sends chills down my spine.
Here’s an article explaining what’s going on.
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