Starting with New York, there’s a movement to force those with affiliate programs to collect taxes on products sold and remit the taxes to the state. This can apply even if your business is based elsewhere.
Why is this happening? The state governments are broke and looking for ways to increase their revenues during the recession. This means targeting other revenue streams. Currently, there are about a half dozen states (including California) that want to turn you into a tax collector.
So, in addition to collecting sales taxes sold on stuff sold to residents in your own state, you’ll get the additional ‘joy’ of collecting for other states too.
For now, some online retailers that fall within the New York law (because of the amount they sell to New York clients) have simply discontinued their affiliate programs for New York residents. That’s a temporary fix.
This type of nonsense will continue until the governments figure out a unified system to collect taxes online and disburse the funds at the federal, state, and local level. The issue isn’t going away. There’s simply too much money at stake that greedy politicians want to get their hands on and cause you a headache in the process.