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Court: New York can tax Amazon, other online purchases

Amazon purchaseIt looks like the era of tax-free purchases from web based stores could be coming to an end. A while back, the state of New York decided it could raise a bit of much-needed revenue by collecting tax from online retailers. Generally states can only collect taxes if those retailers have a bricks and mortar presence in the region. But New York figured out an interesting way around that - it decided that advertising affiliates counted as a physical presence. In other words, as long as at least one New York State resident made money by placing Amazon ads on his or her web site or blog, New York could collect taxes.

And now it looks like the New York state Supreme Court agrees with that logic. Amazon and Overstock.com had sued the state over the law, and Newegg had decided just to stop collecting taxes. This week's ruling could change all of that.

This could be the beginning of the end for tax-free online purchases. Or it's possible that we could see Amazon, Newegg, Overstock.com, and similar web retailers kill their affiliate ad programs in order to stay competitive with companies that don't have to charge tax in states like New York.

It's worth noting that most states do actually require citizens to pay taxes on items purchased online. It's just that you're supposed to report those purchases voluntarily on your annual tax returns. And almost nobody does this. What's new about New York's law is that it requires the retailers to collect taxes.

[via Alley Insider]
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