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Court: New York can tax Amazon, other online purchases
It 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]
Comments
25
Subscribe to commentsTristan PhillipsJan 13th 2009 1:49PM
No one should be surprised that New York won in its own court. The NYS Supreme court is the lowest court in New York's system. The court hierarchy lowest to highest is: Supreme Court, Court of Appeals, Appellate Court.
Watching New York twist a US Supreme court case and ignore Congress' moratorium to feed its cash hungry maw is disturbing. It will be interesting to see what happens when this reaches the Federal courts.
Juan AguilarJan 13th 2009 8:23PM
There is no Federal moratorium on the collection of state retail sales and use taxes. The Federal moratorium is on Internet access fees.
numerwanJan 13th 2009 1:56PM
You can throw CT into that mix... Currently hearing whether or not to charge in CT right now...
AnthonyJan 13th 2009 2:07PM
Taxes keep our world going. I just don't understand why everyone's so opposed to them.
Don't you like driving on roads, riding on buses, having clean water, helping children stay healthy, using libraries, having street lights, & basically not living in a cave, wearing skins off animals you killed w/ sticks & dying at the age of 27?
If you do- thank taxes. Now pay up!
junyoJan 13th 2009 2:44PM
That's idiotic. taxes don't keep our world going, the people that keep our world going do. the bricklayers, bus drivers and doctors, and precious few of them are employed by, or recipients of, my tax dollar. Tax dollars didn't buy the clothes I wear in lieu of animals skins, nor pay the person that made them, or the webmaster that ran the site where I bought them, or the driver that delivered them. So why, exactly, would I "thank taxes" or let them stick their grimy hands in my pocket for a piece of a transaction with which they had precious little to do with?
If the government were the best, most efficient way to pool money and collectively pay for goods and services used by the group then maybe you'd have a point. But the government overpays for things that only a handful of people people use, and do a halfassed job of delivering it. Compare the speed/service between Fedex and the USPS. Which one's employees are known for going nuts and shooting people? Thank taxes. Compare private security to the police. Who's more likely to shoot you 61 times for being the wrong shade? Thank taxes. Compare a private maintenance company to a military motor pool. Who's more likely to spend 300 dollars on a screw? Thank taxes. Who's more likely to raise their prices when the economy's tanking; a private company or the government? Thank taxes.
PeteJan 13th 2009 2:52PM
Anthony,
You act like people in New York aren't paying enough taxes already. I would be willing to be that for the average New Yorker the government takes close to 50% of their paycheck, whether its the federal government, state government, or local governments in the form of sales taxes and property taxes. Everybody can understand reasonable taxation, but 50% taxation is oppressive taxation, and its unnecessary, no matter what programs you think are important. If New York can't run their government on the taxes they already receive then they've got bigger problems to worry about...
AnthonyJan 13th 2009 3:09PM
Junyo & Pete- Did you go to a public school? Thank taxes. If you didn't, thank your parents for going to public schools, universities, etc & making enough to send you to a private one (paid for by taxes)
Do you want people who don't make enough money to get medical treatment (so they can stay well & keep you from getting sick by laying on the street w/ black plague coughing on you) (taxes)? - yes, that's a blunt example & I know that Medicaid does a lot more. But these two seem to not get the basics of what taxes do.
Finally- bus drivers! Most muni's are government subsidized by local taxes. Amtrak, BART, whatever- tax revenue-based income.
Government at all levels will collect 30.8% of the nation's income for 2008. Tax Foundation. Far less than most industrialized nations.
PeteJan 13th 2009 3:24PM
Did I go to a public school? NO! Did my parents go to a public school? NO! Why? Because public schools, paid for by taxes, are wrought with low expectations. Look around, American public schools are a joke! Do I ride the bus? NO! Why? Because I actually want to get somewhere in a reasonable amount of time. Anything the government gets its hands on is inefficient, bloated, and just plain shitty. Yes, the government should provide BASIC services, and as I said earlier a small amount of taxation is always necessary. The government could provide BASIC services for less than 10%...Furthermore, if you love taxes so much, why don't you write the IRS a big fat check? No one is keeping you from paying more taxes. As for me, I'll drive my own car, pay for my own healthcare, and pay for my own schools. I'll also give to the charities which I believe do the best job of helping those in need, all of which do a far better job than any government agency.
PeteJan 13th 2009 3:29PM
Another thing... take a drive around and count how many buildings in your town are government buildings, and then count how many are private businesses, stores, or residences. I guarantee the number of government buildings is not anywhere close to 30%. Yet you willingly hand over 30% of your hard earned money so the government can waste it. The government sucks up 30% of the resources but only contributes about 5% to the gdp.
AnthonyJan 13th 2009 4:14PM
Pete- If 30% of all buildings were government owned you'd really have something to bitch about.
Enjoy driving your car on GOVERNMENT FUNDED ROADS!
JunyoJan 13th 2009 6:21PM
Funny, the first highway in the country, the PA turnpike, built by private industry. The rail system in this country, built by private industry. Plenty of private, profitable bus and trolley lines. Funny, VA allowing private industry to build the roads and assume the costs of construction and doing well, and PA desperately trying to sale poorly mantained roads to private companies because the state did such a bangup job. Funny how the people that set and collect the taxes never seem to send their kids to the tax-payer funded public schools. Real vote of confidence there.
What you don't grasp is it's fine to ask me to pay for such I used/need. But to grab increasing chunks of my money to throw down a rat hole offends me. You tax me for a road, I expect a smooth piece of blacktop, not a cratered obstacle course littered with Teamsters leaning on shovels. To be taxed to death by a governor that engineered the current financial downturn especially offends me. New York made a deliberate choice to rely on reciepts from Wall Street and chased taxed other industry/revenue elsewhere and now that their gamble failed, as per usual they're presenting the bill to the tax payer.
And saps like you eat it up and beg for more.
conorJan 13th 2009 8:23PM
Junyo,
It cost $300 to replace thing in military motor pools because they need to get it back to a supply chain and fly in parts, USPS is cheaper than FedEx and Police are only more likely to shoot someone dead because rent-a-cops dont carry guns, only tasers.
avteanJan 13th 2009 2:08PM
Tristan,
The actual hierarchy in NY is Supreme Court, Appellate Division of the Supreme Court and the Court of Appeals is at the top.
Hi KennethJan 13th 2009 3:15PM
but they already charge tax here in ny
IanJan 13th 2009 4:17PM
Anthony- I agree with you completely. I am sick of hearing the " wahh wahh I don't want to pay sales tax" complaint CEO. People about online purchases. They have no logical argument- they just don't want to pay. It's like, no kidding?!? You don't want to pay sales tax?!? Wow - didn't see that coming.
Sales tax revenue is an important revenue that keeps states going and providing services to their residents. Quit botching everyone- or nov tow asratw that does not have sales tax.
PeteJan 13th 2009 3:37PM
wait... let me guess... you're still in high school or college and mommy and daddy still pay for all your food, clothes, and toys...
IanJan 13th 2009 4:29PM
Nope- 31, broke, one child, married- just not willing to abandon my ideals yet.
RocketboyJan 14th 2009 9:25AM
So Pete, your Ideal is that you exist for the benefit of the state, not the other way around?
SyJan 13th 2009 3:30PM
Leave it to New York state to find a loophole in taxing people. It doesn't surprise me. The government is the most inefficient institution we have today. While most of businesses and families find ways to cut spending, the NY government find ways to get more revenue by taxing more.
RocketboyJan 13th 2009 4:05PM
Wow, that must have been a hard decision..
NY Gov't : Dear appointed judges, we would like to charge more taxes which help pay your salaries.
NY Judges: Approved!
To the REAL waah waah'ers, the issue is that NY is creating their own version of the law, against the wishes of the citizens of this already overtaxed state. Unless I can go to an "affiliate's" house and buy and sell goods with the parent company, that's not a physical presence.
Also, if I CALL, FAX, or WRITE a company in order to buy goods, I can only be taxed if the company is incorporated in the state that I reside in. Why should it matter if an order is transmitted via analog or digital means?
If the reasons were sound back then, why does the Internet, which is just another means if long distance communication, require a totally new set of rules?