Tax Case Shadows YouTube Affiliate Money Plan

    June 27, 2008
    WebProNews Staff

If affiliate revenue will make video sharing site YouTube a money maker, we wonder how New York’s recently passed law requiring tax collection on affiliate-initiated sales could impact the strategy. and the State of New York will duke it out in court over New York’s grab for taxes on Internet sales that start with an affiliate based in the state. This fight could be of interest to Google as well.

NewTeeVee cited comments made by YouTube co-founder Chad Hurley about potential for making money on videos with affiliate deals. Links to Amazon and iTunes represent the early test.

YouTube pulls in plenty of traffic, but its impact on Google’s bottom line rates lower than what Google brass and shareholders would probably like. While Google effectively places ads alongside contextual search, netting it billions each year, the approach hasn’t taken off with YouTube or its viewers.

The New York case opens up a proverbial can of worms about affiliate marketing. What if someone from Binghampton uploads a video of a dancing dog, and YouTube drops in an affiliate link to Amazon that leads to pet care products? Will New York State consider that a local sale due to the residency of the video poster?

That may seem a silly question, but in our litigious society, it deserves at least some passing thought, even if only to find grounds with which to dismiss it. One can bet other states will watch the Amazon/New York case closely, as they could find themselves in position to claim a windfall of sales taxes they might not ordinarily receive.