I just got off a conference call where the Direct Marketing Association (DMA) attempted to give an overview of the New York State Tax Bill that goes into effect on June 1, 2008.

While LinkShare joined forces with the DMA to get its affiliates and partners involved in the teleconference call, no LinkShare representatives spoke during the more than hour long call, which also included a Q&Q period.

Speaking on the behalf of the DMA was its Tax Counsel George Isaacson, who previously held a call on April 30th to talk about the legislation in its raw form. The call today, which had about 175 participants, was held to give further interpretation of a New York Department of Taxation and Revenue‘s Technical Service Bulletin (TSB) – issued on May 8, 2008.

Isaacson said that the TBS was “less aggressive than our greatest fear.” He called the TSB more focused and more helpful as to what it means for direct marketers.

The crux of the call focused on what constitutes the nexus of doing business in the state of New York and how under this bill the burden of proof switches to the marketers. Originally, Issacson said he interpreted the statute to mean that if a marketer included a Web link on their site, it was the equivalent of having a sales representative in that state and that such a link was sufficient to show nexus.

However, now, according to Isaacson’s reading the of the TSB, the bottom line is that NY has now said that direct marketers can defeat the presumption of nexus if that marketers is not engaged in another other solicitation activity on behalf of a company beyond a Web link. “A pure vanilla affiliate marketing arrangement” with only a referral link will be sufficient to defeat the presumption of nexus.

Because this statute is not limited to a direct relationship between a merchant and a marketer (and can include third party entities such as an affiliate network) Isaacson encouraged New York-based affiliates contact their networks and make sure their terms of service contracts expressly note that no other solicitation going on beyond a referral link. Issacson said, that way if you are audited, you will have a contract where it is specifically “noted about the additional activity.”

According to Issacson’s interpretation of the TBS, “merely advertising on a website does not constitute nexus.” He added that the original language was broad and concerned him, but the TSB “is very clear that advertising does not give rise to the presumption of nexus.” He also noted that PPC will not give rise to the presumption of nexus because it is a set fee based on the number of clicks, therefore, falling under the heading of advertising. He also said that lead generation activities appear to be closer to the definition of advertising under the TSB and would not be subject to nexus.

Isaacson speculated that the TSB’s broader interpretation of the statute may have been influenced by the lawsuit filed by Amazon.com against the state of New York calling the law unconstitutional. He called the move by New York “a hunker down mentality in the face of the Amazon lawsuit in an effort to demonstrate that the presumption is not conclusive and switch the burden of proof. Otherwise, it would be unconstitutional.”

He also noted that some companies (such as Overstock.com) have taken another tact. Instead of working to defeat the presumption of nexus, the company has chosen to terminate those relationships with New York-based affiliates.

There were a lot of specific questions regarding email, newsletters and other efforts undertaken by marketers on behalf of a seller, but this was not a call to resolve individual issues or give out legal advice, but to interpret the statute. There were also brief discussions about the complicated and somewhat unusual amnesty laws associated with this statute. Isaacson suggested consulting your own lawyer regarding your company’s specific situation and best course of action.

Linda Buquet has been following this issue closely and was also on the call. Check out what she had to say on her blog.