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article imageNew York Wants Online Retailers To Give Them Their Tax

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By KJ Mullins     Apr 12, 2008 in Internet
Hey New Yorkers have you heard about the new way your state is going to tax you? The New York legislature has approved a bill that will require online retailers to collect sales taxes on purchases shipped to the state.
It doesn't make a difference if an online store doesn't operate in the state or have employees working there. All that depends on if New York Governor David Paterson signs the measure.
The "Amazon tax" will close a loophole for Internet retailers who derive sales through affiliate programs where Web site owners place a link to the merchant on their site and earn a commission on those sales. The lawmakers say this gives those from out of the state an unfair 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," James Sherin, president CEO of the Retail Council New York, said in a statement reacting to the bill's passage.
Those in the legal biz expect Web affiliates to be challenging this motion.
New Yorkers have been allowed to shop online tax free. Consumers are required to report those purchases on their tax returns and remit a use tax. Most people haven't a clue about that little tidbit though. Collecting that tax has been almost impossible.
The new requirement if passed will bring about $50 million into the revenue this year.
Spitzer entered the bill in February but had to hightail it out of office when his little online games came out in the media.
Back in 1992 Quill v. North Dakota made it so out of state retailers were not required to collect sales tax on buys made to states where they don't have a physical presence. The tax laws from state to state differ so widely that making ecommerce sites have to know all the various ins and outs would put a burden on interstate commerce.
"Quill says what it says, and it says physical presence," Goodwin told InternetNews.com. "It is an aggressive posture by the states. The states have to expect that there's going to be some opposition to provisions that are coming really close to this definition. That's where the battleground is."
The law only hits those who collect at least $10,000 in annual revenue from affiliates that live in the state. The ruling though may become a nightmare for even the largest online retailers.
There are more than 7,400 state and local tax codes in the U.S. alone.
"Brick-and-mortar retailers will have to keep track of just one tax law at a time, while online retailers will have to keep up with 7,400," he said. "A neutral tax system would have all retailers collect tax on one standard or the other."
There is talk of streamlining the tax codes among the states but for the time being that is just talk. With the complexities of each state's rules that ideal will be a fight in congress if it comes to pass.
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