Online Retailers Taxing N.Y. Customers

Ariane

Wednesday, May 28, 2008

Online retailers will be required to charge sales tax to customers ordering from New York as of 6/1/08. An estimated $50 million in sales tax is expected to be generated from this ruling.

This applies to companies that don't have a brick-and-mortar presence in New York but have at least one person in the state who works as an online agent -- basically someone who links to a web site and receives commissions for related sales.

Although this may be a set back for New York's online shoppers, "brick and mortar" stores within the state are jumping off their hinges.

Jerry Nally at Chrono Tech Watches in White Plains says those so-called "e-tailers" steal his customers.

"They'll come in our store, look at our product, touch it, play with it, look at the warranties, then go back to the web and buy it tax free," says Nally.

For years, businesses like Wal-Mart, who have storefronts and online stores, have been required to charge sales tax to all their customers in every state. On the other hand, online companies without storefronts have not.

In response, Amazon.com is now suing the state of N.Y. claiming that it unfairly targets Amazon, is overly broad and vague, and violates the commerce clause of the constitution because it imposes tax-collection obligations on out-of-state entities.

The suit also argues that the people linking to Amazon products are not agents, but are simply paid by the company for advertising. Hundreds of thousands of Web sites advertise for Amazon. New York now considers anyone who runs one of those sites from within the state an agent for Amazon.

The state of New York responded to this claiming that the law closes a "tax loophole."

According to Tom Bergin, a spokesman for the state Department of Taxation and Finance, the change is a necessary update for modern times.

Businesses with a physical presence in New York already collect the state sales tax on online purchases. The proposed law would apply to companies that have $10,000 or more in New York sales.

Customers in New York can still order items online without being charged sales tax; they just can't be referred by a New York based business.

Online Retailers Taxing N.Y. Customers

Online Retailers Taxing N.Y. Customers

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