Politicians have been fuming for years over the significant amount of sales tax lost to internet sales. Case law states that an internet business must have a physical presence in the state in order to be forced to collect sales tax for that state. In the case where the sales tax is not collected by the business, a use tax usually applies. But individual consumers rarely pay use taxes for internet purchases.
The state of New York believes it has found a loophole. Some online retailers, such as Amazon, have affiliate programs. If Chad’s News was an Amazon affiliate, for example, I would have special links on my site to Amazon products, and I’d receive a percentage of any sales made via someone clicking on those links. New York legislators contends that my (theoretical) status as an affiliate constitutes a physical presence, and (if I lived in New York) allows them to require Amazon to collect sales tax. It’s convoluted. Expect court challenges.