Filed under: Business, Internet, News
New York to begin charging sales tax for online purchases
You know how if you live in most states in the US you don't have to pay sales tax on items purchased online? Yeah, that's about to change for about 19 million residents of New York State. Legislators have approved a bill that requires large online stores to collect sales tax for anything shipped to New York. Technically, the tax isn't new. Consumers were supposed to be reporting these purchases on their tax returns all along, but nobody really does. The law just passes the burden from consumers to retailers.
While the bill doesn't become a law until Governor David Paterson signs it, he's expected to do so soon, as the measure is expected to raise $50 million and help balance the state budget.
Companies that collect less than $10,000 per year from sales to New Yorkers will be exempt. But something tells us that means you'll be paying taxes on purchase from large stores like Amazon.
Update: As we've reported in the past, this law wouldn't require all online stores to charge tax, but only online stores that do some form of business in New York State. And that business can include something as simple as operating an affiliate link program that lets New York residents make a few bucks by linking to Amazon products on their web pages. Former governor Eliot Spitzer had proposed the law late last year, but we had thought it was dead -- until yesterday. While it's possible that one outcome of this law could be businesses pulling out of New York altogether, a much more likely outcome would that Amazon and other companies with affiliate programs could refuse to let New York citizens sign up for affiliate accounts.
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Reader Comments (Page 1 of 1)
ChronoZaga said 10:15PM on 4-12-2008
How exactly is that going to work? I mean, state law in New York can't be enforced by the police in Kentucky (for instance). It's not federal law, so it can't be tried in federal court, and the FBI wouldn't get involved. Is it on the honor system? Because I know what I'd say if I ran a business and someone from New York told me I owed their state money, when I'm not in their jurisdiction.
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Fred Thompson said 11:24PM on 4-13-2008
That's exactly correct. The law holds that sales tax must be collected if there is a physical presence within a state. NY will fail, miserably, with this if they attempt it. Why? Not only do they not have jurisdiction, they'll be hit with attempting to interfere with inter-state trade. That issue was resolved more than 230 years ago when the Articles of Confederation were replaced with the Constitution. One huge reason for this, and the eternal problem of any kind of non-point-of-sale...sale is the huge number of independent taxing authorities, each of whom can make its own taxation rules. There are many tens of thousands of independent taxing authorities. The classic argument for a national sales tax is the claim trade would increase because there would be one set of taxation rules. The counter argument, of course, is the lack of Constitutional authority for a Federal sales tax. No local or state government is going to willingly allow the Federal government to remove its ability to levy taxes on its own residents. This is similar to the way some states try to tax their residents for driving over state lines to buy cigarettes, liquor, etc. Those attempts never withstand legal challenge.
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Jonathan Wienclaw said 10:44PM on 4-12-2008
As a New Yorker who makes plenty of purchases online, I plea, Gov. Paterson, don't screw up my good first impression of you with this BS...
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Jeebus said 10:20PM on 4-16-2008
The guy's a democrat, you should hardly be surprised.
STEVEN EPSTEIN said 8:42AM on 4-13-2008
i guess i just have to ship everything to my brother in new jersey. then every 2 weeks when i get gas in jersey(im in staten island) i stop by his house and pick my stuff up and the cigarettes my bro gets for me. see no tax from new york. god i hate my own state lol.
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Michael said 11:27PM on 4-12-2008
Effective immediately upon passage, my corporation will withdraw all business connections from the state of New York and will no longer purchase from establishments within its borders. This constitutes almost 150 million dollars in losses for them. Hopefully, others will follow suit and make it costly. This unilateral elitism, typical of their state, needs to end. This is a violation of the spirit and letter of interstate commerce law.
Oh, and for those who don't think this affects them, it'll be passed on to you in higher prices. You can also say goodbye to those shipping deals like Amazon Prime.
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Tom said 12:05AM on 4-13-2008
And you are?
Dave A. said 8:44AM on 4-13-2008
You heard it here first... whatever company this is referring to.
BananaBoat said 8:48AM on 4-13-2008
Normally I don't comment at download squad, but holy crap did I have to LOL when I saw Bill Gates posting above.
Conor said 8:45AM on 4-13-2008
Um, isn't it settled federal law that a state can't force out-of-state tax collections by businesses that lack nexus? (See Quill) This sounds like wishful thinking on the part of a lot of New York Democrats.
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Christina said 2:38PM on 4-15-2008
The thing is, the Quil decision stated that the reason businesses couldn't be forced to collect sales taxes in places where they didn't have nexus was not because it was wrong, but because it was too complicated. With the advent of web services, any business can contract with a vendor that will assemble info for all jurisdictions, maintain it, and instantly calculate sales tax on every transaction. Often, the vendor will even remit the paperwork.
The issue that everyone is missing is this - the new tax is not really new. Consumers have always been required to pay sales tax on all purchases. Previously, if the retailer didn't collect sales tax, the consumer was required to report their purchase on their state tax return and pay the tax themselves. As you can imagine, this is pretty unenforceable, and a huge source of lost revenue for the state.
If you think this is wishful thinking, look out. The streamlined sales tax organization has been working on this for 15 years (since Quil), and they're almost there. We're looking at 43 states enforcing a similar law within the next 24 months. Check it out at http://www.streamlinedsalestax.org
Jackie said 8:50AM on 4-13-2008
I think this article is misinterpreting the new law. The state of New York cannot require businesses located outside of New York to collect state sales taxes. I think what the new law actually does is require online businesses located WITHIN New York to collect sales tax from New York residents. Frankly, I'm surprised that this isn't already the case as it is in other states.
For example, here in California, if you are a California resident and purchase online from a business with a physical presence in California, then you are charged sales tax. That's why I only purchase from online retailers located outside of California. California would love to be able to collect sales tax on my purchases from businesses located in the other 49 states, but they can't. They don't have jurisdiction. Of course, I'm supposed to list my out-of-state purchases on my tax return and pay a "use tax". Yeah, right! Like I'm really going to do that!
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ChronoZaga said 12:41PM on 4-13-2008
I think you have too much faith in legislators, unfortunately. I wouldn't put it past any politician to pass a law that was unenforceable, had legal precedence against it, and would cost the state tones of money, just so that they can say they tried real hard come reelection time.
Fred Thompson said 11:24PM on 4-13-2008
Jackie,
You are correct about in-state presence. It's still hard to collect the taxes because the burden of responsibility is on the merchant to match the sales taxes in the destination area, too. Merchant A has a physical presence in Buffalo but needs to ship to (pick any other area) so they are legally required to collect the taxes which apply in the destination. How can the company realistically know the town council of Pig Nuckle decided to add a tax of their own? It gets really sticky when food and medicines are sold. The classificiations vary between districts so what might be considered a non-taxable or low tax food item might be considered a processed food item with full tax in another. This is one reason non-POS retail is attractive.
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James said 12:00PM on 4-14-2008
I'm a bit confused, like everybody else here it seems. Either the law means (A) "businesses in NY that sell online to consumers in NY must collect NY sales tax", or it means (B) "businesses anywhere that sell online to consumers in NY must collect NY sales tax". (A) is obvious, and AFAIK is the policy already in every single state that charges a sales tax. (B) is totally insane, unconstitutional, and unenforceable. Especially with the update to the original post, it sounds more like A than B, which begs the question... why issue a new law at all?
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NoK610 said 9:41PM on 4-14-2008
I hope this falls through. Living costs in NY are already ridiculous and it seems like everyday they find a new reason to make more money. Greedy bastards.
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