Great news from the front line of the New York State Affiliate Tax (also known as the Amazon Tax) front. After dropping their New York affiliates Overstock has turned around and joined Amazon in fighting the affiliate tax. The news was fist broken this weekend by Linda at 5 Star Affiliate Programs who along with Heather Paulson and Shawn Collins has been following the events closely and getting key information out into the affiliate community. I have to say I am impressed at how our community has collaborated through the use of social media to create a voice and ground swell against the tax issue.

I was fortunate to be speaking to our business partner Adrian from Meet Innovators who had been reading our posts and he told me he was going to interview Patric Byrne the CEO of Overstock. Adrian asked what questions would I like to have asked about the current issues. The interview just came out today and not only shows Overstock’s position that this tax is ridiculous, but also talks about how valuable (and large) Overstock’s affiliate marketing program is and that it is a very important part of their marketing initiatives. Here are a few segments from the interview:

Patrick: About 15 years ago, the Supreme Court found that you cannot hold a catalog company responsible for collecting out-of-state sales tax. There are 7,200 taxing jurisdictions in the United States. In some jurisdictions, cotton candy is candy. In some, cotton candy is food, and food and candy have different tax rates. A company in Utah, for example, cannot sit here and know the right way to tax every possible product in Paducah, Kentucky. It is impossible.

The Supreme Court wisely said that the burden cannot be put on the out-of-state retailer. Therefore, I think New York’s law is directly unconstitutional. We’re not suing the state for any money. We’re suing to enjoin them from ever acting upon this law, and we’re trying to get the Court to throw out the law.

We had to drop the affiliates because of the risk of not collecting the affiliate tax and then someday having New York win. We would get dinged for that. So we had to drop the affiliates immediately.

The decision to seek an injunction is the right long-term thing to do. We have a law firm in New York, and we’re putting hundreds of thousands of dollars into this.…….

Adrian: Do you have a large affiliate program or is most of your revenue from Super Bowl ads and type-in traffic?

Patrick: Affiliates are very nice double-digit percentage of our business. The outside sees our growth of $200 to $800 million, and it may look like it was all smooth. It really was four to five different things we found that worked. One of the big ones is the affiliate business.

We were doing less than $1 million a year in affiliate business when we discovered this was a great opportunity for us. The affiliate business is still a very healthy chunk of our business, larger than $100 million.

Last year, Amazon dealt a real blow to their affiliate program by basically saying they were going to stop paying affiliates or only pay a drastically reduced fee on a wide range of products. Our affiliates bring us value, and we have supported them. We’ve regularly won prizes such as “Merchant of the Year” and “Program of the Year” from Link Share. That is a testament that we, as a company, take our affiliate team very seriously….

The tail end of the interview speaks about how the affiliate community can get involved and help Overstock and Amazon fight the Tax. Please take the time to do something regardless of whether you are directly involved with this tax. This looks like it could spread to other states if this is not stopped dead in it’s tracks. Make your voice heard! Thank you Patrick Byrne for stepping up to the plate. Special Thanks to Adrian for getting this interview and information for us. We hope to have more news from the IAB public policy front lines.