Until NY state came up with the internet sales tax law, affiliate marketing was the primary way I generated revenue from my site. Since Amazon and other companies started to stop working with NY based affiliates, my revenue has gone down over 70%.
Is there any way around this to continue working with these merchants?
When this came about, our coupons business was deeply impacted by it as well (we're in NY too).
In order to bypass this issue, some people create a corporation in Delaware and use that as their base.
They get a virtual office for a physical address in the state (provides you an address and forwards any mail) and start using that entity in affiliate network accounts. You won't have a problem with merchants dropping you anymore (until of course Delaware decides to bring the same law :)
Side note: It's worth consulting both an accountant and a lawyer on this.