I suppose it was about a year ago when New York enacted a new law which considers any companies outside of NY who have affiliates earning $10k or more annually to have established nexus within the State, even if they do not have a NY nexus in the traditional sense.

The result of this new legislation was that some companies decided to pay the taxes and others, such as Amazon (as far as I know), opted to drop their affiliates within that State.

Now in 2009 we have a handful of other States with new legislation which includes "affiliate nexus" language. Those States apparently are: California, Maryland, Rhode Island, Connecticut, Minnesota, Hawaii & North Carolina. More details at http://www.cj.com/news/internet_tax.html

So.... now I'm beginning to wonder... if an affiliate earning $10k or more within NY was within the legal definition of having a nexus within that State, how then does this affect the web hosting industry?

Let's say the affiliate is hosting their websites on equipment and with a company in another State. Does that mean there is an "affiliate nexus" in that State as well?

For example, if someone hosting in Virginia decided to move their sites to a host in North Carolina, would that web publisher / affiliate be considered to have established a nexus in NC? Would North Carolina's Internet Tax (if it passes) be applicable to the web publisher / affiliate or the merchant?

I haven't yet seen this exact topic yet covered from a web hosting perspective. If, for example, North Carolina (or any of the other States that I mentioned above) considers the location of hosting to be a nexus, couldn't that potentially result in a near literal exodus of web publishers / affiliates moving their web hosting out of those "Internet Tax" States and in to friendly States?

It seems that this sort of legislation has the potential to have a HUGE impact on web hosting operations within the "Internet Tax" States. I'm sure if affiliates were given the choice of losing their affiliation with various merchants or moving their websites elsewhere, they would choose the latter.

Can anyone provide further details regarding this issue?