New York Tries To Rope Amazon Into Playing Tax Collector

from the bit-of-a-stretch dept

Mon, Apr 21st 2008 9:05am — Timothy Lee

The New York Times reports that the state of New York is demanding that Amazon and other e-tailers begin collecting sales taxes from customers in the state by June 1 or face audits and bills for unpaid taxes. Under federal law, a state can only require a business to collect sales taxes for it if the business has a physical presence in that state. So Amazon collects sales taxes in Washington state, where it has its headquarters, but not in most other states, including New York. But New York has hit upon a novel legal theory: Amazon might not have a physical presence in New York, but many of Amazon's affiliates do, and New York argues that those affiliates constitute a "physical presence" sufficient to require Amazon to collect taxes for the state. It's a novel theory, and one that Amazon will almost certainly challenge in court. It doesn't make a whole lot of sense to me. Amazon's affiliates are essentially selling Amazon advertising space on their websites. They're not employees of Amazon any more than I become an employee of any site that purchases advertising space on my blog. If New York's interpretation is accepted by the courts, it would spawn endless litigation about which types of relationships establish a "physical presence." There's also a good chance Amazon would just cut off New York residents from participating in the affiliates program to save itself the headache of potentially having to comply with thousands of different taxing jurisdictions. Either way, nothing good is going to come from this.

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Filed Under: e-commerce, local presence, new york, taxes
Companies: amazon

32 Comments

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Ima Fish, 21 Apr 2008 @ 9:39am

This is so asinine. The easy solution is for people to pay state taxes from whatever state the product is shipped.

For example, if I go to California from my state to buy something, I have to pay California's sales tax. I do not have to pay my state's tax. If I send an agent to California to buy that something, once again I have to pay California's tax but not my own. However, if I buy online from California, for some bizarre reason my state wants a cut.

So under my plan if I buy from Newegg and it ships from New Jersey. I should pay New Jersey's sales tax. If Newegg ships from California, I should pay California's sales tax.

The reason (most) states hate this idea is that some will not get a cut. (Not that they deserve a cut, but that's a different issue.) And it could also lead to states lowering their sales taxes to increase the number businesses moving into their state. So states would be competing against each other. And one thing governments hate is competition.
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Max Powers, 21 Apr 2008 @ 9:47am

Cities and States Keep Looking for $$$
I can see the nightmare of litigation coming. It seemed like a simple law that you collect taxes from sales you collect from the state you are based. Maybe New York and other cities and states should learn how to balance a budget.
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Ima Fish, 21 Apr 2008 @ 9:51am

Re: Cities and States Keep Looking for $$$
"Maybe New York and other cities and states should learn how to balance a budget."

Good one! ;-)
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Anonymous of Course, 21 Apr 2008 @ 9:56am

Like drugs to an addict
Tax money is to government like drugs
to an addict. They'll use any twisted
logic to justify their actions when times
are lean.

The state of Massachusetts demanded excise
tax on my vehicle fully two years after the
registration plates were returned because I
was living in another state. Their reasoning
was I didn't tell them that I'd moved so I owed
them the money. I didn't tell them that I'd
bought the car, they started collecting excise
when I registered it. But they said it didn't
work in the reverse. Ignoring the fact that they
have no authority to demand taxes for a vehicle
not in their state from a non-resident they
threatened me with arrest and issued a warrent.

It was only $97 but instead of paying I hired
a lawyer. I'd rather pay his fees then knuckle
under to extortionists.
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TheDock22, 21 Apr 2008 @ 9:57am

Re:
And it could also lead to states lowering their sales taxes to increase the number businesses moving into their state.

We do not have a sales tax here in Montana, but there are no businesses clamoring to open up shop here. Personally though I would love to have a sales tax. That extra money could go towards education and roads which we desperately need money for here.
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inc, 21 Apr 2008 @ 10:04am

There should be no change to the existing laws. Just because the state governments are getting even greedier doesn't mean we need to bend to their will. I don't see the difference between an internet based business and a mail order catalog.
What I do see is more companies running online so more money being made there.
In Florida there is no state tax for regular citizens but for corporations there is a state tax for money made from online transaction are taxed eventually. This concept that the state receives no money from online businesses is absurd.
What New York should be doing is promoting New York based businesses to encourage buyers to shop local online retailers.
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Anonymous Coward, 21 Apr 2008 @ 10:08am

Re: Re:
only problem is those programs are the last to get addressed even with extra money. I've heard that from the lottery which was supposed to subsidize school programs. Now you see that the little money that does go to school is then offset by the school budgets getting slashed. So now we have a state run gambling ring without getting what was promised.
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Anonymous Coward, 21 Apr 2008 @ 10:08am

That extra money could go towards education and roads which we desperately need money for here.

Yes, the money could go to these things. It's unlikely that even if Montana did implement a sales tax that either Education or roads would get the money that they deserve.

States are always short of the money that they "need". Of course, if the states actually tried to get the most out of the money the DO get, instead of pushing earmarks and wasteful spending, they'd have a LOT less that they are short of.
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Matt, 21 Apr 2008 @ 10:12am

Re: Re:
Yeah, because clearly all that extra money has already gone towards education and roads, just like Sarkozy's salary perhaps?
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Dkp, 21 Apr 2008 @ 10:13am

NY V AMAZON who will win
I hope Amazon sues NY for the absurdity of that it would be one thing if amazon was actually in NY.
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Anonymous Coward, 21 Apr 2008 @ 10:15am

lets let Washigton state and New York state fight over this.

IE: if ppl living in New York have to pay New York sales Tax then they shouldn't pay Washington sales Tax.

my question is where do the books get shipped from?
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Anonymous, 21 Apr 2008 @ 10:25am

New York Tries To Rope Amazon Into Playing Tax Collector
Taxes = legalized extortion!
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WDS, 21 Apr 2008 @ 10:42am

Affiliates
I think that the affiliates NY is talking about are places like J&R that sell on Amazon's site rather than people who advertise Amazon on their site. Since Amazon collects for them, I can see that makes NY's argument a little stronger, but I hope still a losing argument.
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Anonymous Coward, 21 Apr 2008 @ 10:47am

Sales Taxes in NY
I believe the current law states that NY residents are supposed to pay NY sales and use taxes on any goods bought out of state or on the Internet and declare it on their personal tax returns. The problem is the burden is on the individual to pay these taxes, making it difficult for the state to enforce this law. NY is simply trying to find a creative way to shift this burden to Amazon in order to better enforce compliance.
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Powerkor, 21 Apr 2008 @ 11:25am

There should be a piece of legislation passed so that you're legally allowed to ignore retard claims like this one... and actually posted on youtube and techdirt so people can laugh at the asshat who claimed it in the first place. Every business pays enough taxes already, stop trying to fill your pockets even more, you greedy greasy big oil corrupt lobbying bastard(s).
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Rose M. Welch, 21 Apr 2008 @ 11:37am

It's just like Ebay...
...an Amazon affiliate uses space on the Amazon server to sell thier goods and services, just as Ebay sellers use Ebay's server space to sell thier goods and services, juast as I purchase server space from Yahoo! to sell my goods and services. Does that mean that Yahoo! Inc. should have to start charging Oklahoma sales tax?

I don't think so. This is a push by NY brick-and-mortar retailers to help curb Internet spending. Many retailers say that not having to charge sales tax is an advantage that e-tailers have over retailers, and that's why thier sales have suffered in the last few years. They really believe that making e-tailers charge sales tax will 'even the ground'.

This is a dumb argument because most people shop on the Internet for convenience, not lack of sales tax. These retailers need to quit complaining and start innovating.

Why, why, why, do these older industrys think that they can stagnate and it's okay, but anyone with a better business model should be made illegal?
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Interesting, 21 Apr 2008 @ 11:45am

I once purchased something from QVC and was suprised to see sales tax on the invoice. When I called to question QVC told me they made a deal with the State of California to collect taxes. Why if NY thinks it needs to money so bad work out a deal with Amazon?
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Matt, 21 Apr 2008 @ 12:02pm

Taxes and Amazon...
Due to this article, I went to Amazon and tried to find something from Target through Amazon (since Target has a physical presence here in Texas) to add to my cart. After a few minutes, I found a window treatment that I figured would suffice for this purpose. A few clicks later, it was in my basket, and lo! Estimated tax was added to the purchase.

I clicked the "why am I being charged tax?" link, and I found this:
Your Order: Tax and Seller Information
Your order contains one or more items from an Amazon.com partner and may be subject to local sales tax, depending on the state to which the item is being shipped.

and this:
Please note: The sales tax indicated on the checkout form is an estimate. The sales tax ultimately charged to your credit card will be calculated when your credit card charge is authorized and will reflect applicable state and local taxes.

So, taxes are being charged on purchases made through Amazon where the 3rd party retailer also has a presence in the locality from which the purchase is originating. I have to believe that if this is the case in Houston, then it should be the same in Manhattan.

So, yeah, this is pretty much a money grab, plain and simple. New York is attempting to charge taxes without Amazon having local representation (i.e. an "Amazon" store in Times Square), which, if memory serves, was part of what caused a little fracas up in that part of the country in, oh, around the early and mid 1770s.
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BTR1701, 21 Apr 2008 @ 12:06pm

Re: Like drugs to an addict
> they threatened me with arrest and issued a warrent

How can they issue an arrest warrant for something which isn't a crime? Non-payment of vehicle fees is a civil matter, not a criminal one.
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BTR1701, 21 Apr 2008 @ 12:11pm

Re: Shipping
> my question is where do the books get shipped from?

Depends on where you order them from. Amazon ships them from its nearest warehouse. Also, sometimes an item is out of stock in one warehouse so they have to ship it from somewhere else. That's why your order often gets broken into multiple shipments, because they're coming from different places.
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BTR1701, 21 Apr 2008 @ 12:13pm

Re: Sales Taxes in NY
> I believe the current law states that NY
> residents are supposed to pay NY sales and
> use taxes on any goods bought out of state
> or on the Internet and declare it on their
> personal tax returns.

That's the way it is in Virginia, too. When I did my taxes this year, it asked me to enter the total value of all goods bought through the mail or over the internet and then calculate the amount of sales tax I owed.
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barren_waste, 21 Apr 2008 @ 12:29pm

Taxes?
Hmm...personally, I figure I'll pay taxes when the state I live in starts using the money responsibly. State taxes have gone up on just about everything continuously for the last few years, yet, the things those taxes are supposed to pay for are getting worse. Education? Worse. Roads? Worse. You name it, Michigan fails at it with grandiose style.
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Anonymous Coward, 21 Apr 2008 @ 12:32pm

Taxes ..
If you check further, on many items such as network hardware, it is the final resting destination of the hardware that is used to determine the tax rate.

To IMA FISH ... the reason you are charged California tax when you are there physically and buy something is that the seller can not tell if you reside in California and that California will not bethe item's final destination. If you check further, many states will refund local state taxes to visitors if they can show proof of the sale and residency elsewhere.

Also, if the shipping origin point was used to charge taxes, it creates a problem for any international orders which are tax exempt.

Final destination is where the tax is to be applied, but also, since hard to prove, the shipping destination is used by some states, provinces, countries to determine which taxes to apply.
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Think Global, 21 Apr 2008 @ 12:57pm

Re:
What taxes should you pay if it is shipped from Canada, or Japan, or China, or India, or whereever in the WORLD it might be.

The states are clamouring to "figure out" another method they can use to "generate income" even if it is not deserved.

The bottom line is Amazon is in compliance with FEDERAL LAW. They are ALREADY paying taxes. The Law prevents you from paying taxes TWICE on the same items. This is what this would cause.
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people fear what they do not understand. ALL chang, 21 Apr 2008 @ 1:01pm

Re: It's just like Ebay...
nm
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ALL change is BAD., 21 Apr 2008 @ 1:02pm

Re: It's just like Ebay...
ALL change is BAD.
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Powerkor, 21 Apr 2008 @ 1:14pm

Re: Taxes ..
good to know.
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Robyn, 21 Apr 2008 @ 2:00pm

Yeah, it's talking about the affiliates. Target is in every state, so if you're buying from Target online, Amazon (who runs it) should collect. Sounds fair to me, as far as taxes go.

Funny how all the people complaining about it are probably Democrats who are traditionally tax-happy.

I like the guy who won't pay taxes unless he likes what the government will do with it. So pouty.
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Andy, 21 Apr 2008 @ 8:48pm

What amazon should do is tell people who want something shipped to NY that they won't do it because of goofy laws and that residents of NY should contact their governments to get the law changed. Rather than turn off the affiliate program, which is most likely a much smaller number of people, for people in NY. Amazon can then continue to operate the affiliate program in NY, but since it isn't selling anything, it won't have to charge/pay sales tax. And let's see how quickly that gets overturned once people start complaining.
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A, 22 Apr 2008 @ 8:38am

Amazon/Target
Robyn, like Matt said above, Amazon *does* already charge sales tax if you're buying something through an affiliate with a local presence. I live in New York, and I have ordered merchandise from Target via Amazon, on which I did pay sales tax.
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barren waste, 24 Apr 2008 @ 10:32am

Re:
Pouty? Remember that little thing called the Revolutionary War? Do you remember what it was about? That's right, ding ding ding, unreasonable tax laws. What do we have here? You guessed it, unreasonable tax laws. Well Johnny, what prizes do we have for today's "I'm a Moron" winner?
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Anonymous, 7 Jul 2008 @ 11:33pm

Re:
Look up something called the interstate commerce clause. Ny has no authority to make such a law. It is unconstitutional.
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