Pay Up Amazon! NY State Passes Ecommerce Sales Tax Law For Out-of-State Merchants

[mandy]

Just when it looked like the tax-free ride was over for online shoppers in New York, the state's governor changed his tune.

Late this Wednesday afternoon, Gov. Eliot Spitzer's office released a statement rescinding the new tax policy that would have required online retailers to begin collecting state sales taxes starting Dec. 7...

Under the policy, affiliates would have been treated as representatives of the company, which is enough to establish a physical presence in a state. As it stands, Internet retailers are only deemed to have a physical presence where they have established company operations, such as a distribution center or a sales staff.

The physical presence rule, established by the Quill ruling, has exempted a large portion of online transactions from state and local taxation. That is the loophole that Gov. Spitzer was seeking to close with the new tax policy...

full article: http://www.ecommerce-guide.com/news/article.php/3711676

[maggie777]

Under the policy, affiliates would have been treated as representatives of the company, which is enough to establish a physical presence in a state.

And I thought California was bad.  ;D

[mandy]

Update: the proposed tax isn't dead after all:

In November, Spitzer chucked a plan to collect the sales tax because he thought it was "not the right time" to increase the tax burden.

The state Department of Taxation and Finance quietly issued a memo last year that would have targeted companies that do online business in New York, but don't have brick-and-mortar presences. The agency dropped the idea within days after news organizations began reporting on the issue.

But now it's made its way into the state budget.

"He included it in the budget so the legislature would be able to weigh in on it," spokesman Jeffrey Gordon said. "He determined that was a better process to go through."...

full article: http://biz.yahoo.com/ap/080212/internet_....html?.v=2

[mandy]

More:

The proposed bill would only apply to online retailers that use affiliate programs to generate referrals.

Many online retailers, including Amazon, Barnes & Noble and Buy.com, have programs that allow individuals or organizations to include a link to the e-commerce site on their own Web page. The affiliate receives a commission for sales generated through the referral.

The bill defines affiliates as "representatives" of the company, akin to someone hired to distribute fliers to solicit customers. This means that a company such as Amazon, which has no employees or operations in New York, would be required to collect state sales tax because some of its affiliates live there.

Out-of-state retailers would become responsible for collecting New York sales taxes if their annual revenue from affiliate referrals exceeds $10,000.

The measure would not apply to online retailers that do not use affiliate programs...

full article: http://www.ecommerce-guide.com/news/news...hp/3728371

[mandy]

Update:

With the passage of the hotly debated state budget Wednesday, New York legislators approved a bill that will require many online retailers to begin collecting sales taxes on purchases shipped to the state, even if they have no operations or employees working there.

New York Governor David Paterson is widely expected to sign the measure.

The so-called "Amazon tax" closes a loophole for Internet retailers who derive sales through affiliate programs in which Web site owners place a link to the merchant on their site and earn a commission on sales made from referrals. In lobbying for the bill, the industry group representing New York retailers had argued that the exemption from the sales-tax collection requirement gave out-of-state online retailers an unfair competitive advantage.

"This is a first step — but a critical one — in our ongoing battle to level the sales tax playing field between New York retailers and the out-of-state Internet giants that have, for years, capitalized on an unfair and unintended competitive advantage driven solely by tax policy,"...

full article: http://www.ecommerce-guide.com/news/news...hp/3740276

[mandy]

IR on the new tax:

The provisions, which experts say could set a precedent for other cash-strapped states, were passed by the New York state legislature recently as part of a state budget bill in an effort to raise $50 million for the remainder of the state’s current fiscal year in sales tax revenue from online retailers. Gov. David Paterson is expected to sign the budget bill, making it effective June 1, according to the state budget office...

full article: http://www.internetretailer.com/dailyNews.asp?id=26087

[mandy]

Update: Amazon.com sues New York State

Amazon.com has filed a lawsuit challenging New York State’s new law forcing online retailers to collect sales tax on shipments to state residents...

The company’s complaint argues that the statute is “overly broad and vague.” It is impossible, Amazon wrote, for it to determine which of its affiliates are actually in New York State...

full article: http://www.nytimes.com/2008/05/02/nyregi...f=nyregion

[amy]

In lobbying for the bill, the industry group representing New York retailers had argued that the exemption from the sales-tax collection requirement gave out-of-state online retailers an unfair competitive advantage.

I agree it gives them a competitive advantage and that is why I hope Amazon LOSES ITS FRIGGIN' LAWSUIT!!!!!!!!!!!!!!! 

[mandy]

Update: Overstock will dump its New York State affiliates in order to avoid collecting sales tax:

Overstock.com has become the first major Internet retailer to cancel its relationship with affiliates in New York...

The company’s goal is “showing the New York governor and legislature that this is bad for New York businesses,” Mr. Johnson said. “There are affiliates in New York who will see their business go away because of a not-so-thoughtful action by the New York State legislature.”

Mr. Johnson said Overstock has 3,400 affiliates in New York State, though not all of them are active. The largest is NextJump, a provider of employee benefit programs. It also cut off some comparison shopping services, such as Jellyfish...

full article: http://bits.blogs.nytimes.com/2008/05/14...index.html

[mandy]

NY State clarifies the new law:

The New York State Department of Taxation and Finance has issued an interpretation of a controversial law enacted this year requiring some online merchants with New York-based affilates to collect state sales taxes...

The opinion, called a Technical Services Bulletin, says online retailers engaged in “pure vanilla” affilate marketing programs with New York-based web sites—that is, the affilate is only hosting a link on its site and not marketing the link in e-mails, flyers, or phone calls to New York residents—can overcome the presumption of nexus in the state, Isaacson says. Nexus—or physical presence in a state—triggers a requirement that a retailer collect sales taxes from consumers from that state. “It can be rebutted if it can be proven that there is no additional activity—that the relationship is limited to link referral and includes no other solicitation activity,” Isaacson says...

full article: http://www.internetretailer.com/dailyNews.asp?id=26525