NewEgg Tells NY Tax Collectors To Take A Hike

from the take-that dept

Mon, Aug 25th 2008 6:33am — Mike Masnick

Earlier this year, we wrote about how NY state had passed a highly questionable law designed to force e-commerce retailers to collect sales tax in the state. As you hopefully know, retailers are only supposed to collect sales tax in states where they have a physical presence. The reasoning for this is pretty straightforward. The taxes are designed to help provide core infrastructure services for those retailers (roads, water, etc.). Without a physical presence in the state, the retailers aren't making use of those services, so it doesn't seem right to tax them for it. The NY state law was sneaky in that it changed the definition needed to establish a "physical presence" to include anyone who acted as an affiliate of the retailer. Most e-commerce sites have affiliate programs that allow others to get a kickback on sales for driving those sales. Affiliates are effectively advertisers, driving traffic to an e-commerce site. It's quite a stretch to suggest they represent a physical presence for the company. But, NY politicians did it because they wanted to get more cash out of Amazon.

Different online retailers have reacted in different ways. Both Amazon and Overstock sued over the law -- and Overstock even banned NY affiliates while this law is in place. Online tech retailer NewEgg started collecting the tax, but has changed its mind. It sent a letter to customers saying that it's decided not to collect the tax. There isn't much more of an explanation, but it sounds like it's asking New York to sue it if it wants to get the tax at all:

As a result of recent changes in New York State tax law requiring certain out-of-state retailers to collect and remit sales taxes to the State of New York, we began collecting applicable sales tax for all orders shipped to New York addresses starting June 1, 2008.

After careful review and consideration, we are pleased to inform you that we have stopped collecting New York sales tax, effective August 21, 2008. This decision was driven by your direct and candid feedback and our continued commitment to you as our valued customers.

Your move, New York.

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Filed Under: affiliates, new york, taxes
Companies: newegg

63 Comments

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Improbus, 25 Aug 2008 @ 6:59am

Best PR EVAR!
I have always liked Newegg as a vendor but now I love them. Way to stick it to the MAN dudes! You are going to be my first choice for technology purchases from now on.
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Anonymous Coward, 25 Aug 2008 @ 7:16am

Cuomo is gonna smear them . . .
Dont they know if they mess with New York, Andrew Cuomo will SMEAR them as pedophiles? Maybe they havent recieved his blackmail letter yet?
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jchar_m, 25 Aug 2008 @ 7:22am

Re: Best PR EVAR!
That, my friends, is why NewEgg is made of win.

The NY tax situation is ridiculous and what's more, they made the decision based on "direct and candid feedback". I've always liked NewEgg too, and now they are made of win.
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beernutz, 25 Aug 2008 @ 7:27am

Will they then refund the tax?
Will they refund the tax they have already collected?
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Anonymous Coward, 25 Aug 2008 @ 7:28am

Good Move
I'm glad to see a company stand up for it's customer base.
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Anonymous Coward, 25 Aug 2008 @ 7:33am

Re: Will they then refund the tax?
I had just assume they'd sent it in and after all the customer feedback, decided to quit collecting, therefore paying, the tax.

Good question though, any details on this?
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Overcast, 25 Aug 2008 @ 7:35am

Oh heck yes, I agree with the above, I've always been a customer of theirs, now I may not ever buy PC parts from anywhere else again.

It's sick how the Government thinks they MUST tax everything, give us a damn break.

If they keep gettin' flak - there's a fix... move out of NY
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Anonymous Coward, 25 Aug 2008 @ 7:46am

Isn't Hillary Clinton a Senator there? Hmmm, if you guys would have made her President, she could tax everyone in the US with these types of stupid laws.
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Anonymous Coward, 25 Aug 2008 @ 7:50am

Nice one troll.

Senators from New york state don't make laws for new yourk state, they represent new york state in making federal laws.
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Anonymous Coward, 25 Aug 2008 @ 7:52am

Re:
Just to point out, Clinton is a US Senator not a state senator. I doubt she had any input in this law.
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Anonymous Coward, 25 Aug 2008 @ 7:53am

I don't really think the reason states only tax companies who have a physical presence is because they use the state's infrastructure. It's really because those are the only companies that they can legally tax. And most of them still try to get the tax by calling it a "use" tax, but it's hard to collect that because they can't force the retailer to do it, and most consumers either don't know about it or don't bother paying it.

Thank you commerce clause.
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Michial, 25 Aug 2008 @ 7:55am

Sales Tax
Mike;

Technically it was the purchasers responsibility to submit the sales tax for any purchases made from out of state vendors. The state passed that lay because it is easier for them to go after major shippers than it is for them to go after every citizen for tax evasion.

When the state eventually does go after these guys they will use this as their defense. If the state so chooses they can ask for a list of customers shipped to and go after everyone of them for tax evassion...

So for those of you raving over their decission, hope that they don't provoke the state too much...
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Matt, 25 Aug 2008 @ 7:59am

Re: Sales Tax
uh, let em.

Want to see what happens when thousands of customers are hit simultaneously for tax evasion?

The response won't be small, and you will see government back down.
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Shohat, 25 Aug 2008 @ 8:02am

Erm...
Sales tax is actually a very important macro-economical tool for controlling consumption.
Despite the fact that the current state of affairs is problematic, eventually there will a normal ecommerce sales tax even in the US, just like in all other developed countries.
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Anonymous Coward, 25 Aug 2008 @ 8:13am

Re: Erm...
and when the time comes, that will be fine. it is just another federal tax that gets split among the states. but a single state shouldn't get tax for doing nothing like NY is trying to do.
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ProphetBeal, 25 Aug 2008 @ 8:13am

Something Not mentioned
I received this email from Newegg the other day and while they aren't collect the tax anymore, they did put a disclaimer at the bottom of their mail.

Disclaimer: While Newegg no longer charges sales tax to its New York customers effective August 21, 2008, you may still have an obligation to pay New York State use tax on your purchases. Newegg cannot offer you any tax advice, so please refer to applicable law if you have any questions about use tax. Nothing in this email shall be deemed to approve the validity of any New York State law, including but not limited to section 1101(b)(8)(vi) of the New York State Tax Law, which purports to require Newegg to collect and remit New York State sales tax on its sales to residents of that state.
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Nasch, 25 Aug 2008 @ 8:19am

Re: Erm...
Sales tax is actually a very important macro-economical tool for controlling consumption.

Controlling consumption? Like if we didn't have sales tax, our economy would be overwhelmed by rampant consumption? I wonder how the states with no sales tax deal with this.

IMO your claim makes about as much sense if you interpret it to mean that sales tax revenues go to the fight against tuberculosis.
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JC, 25 Aug 2008 @ 8:19am

NY isn't the only state desperate to collect sales tax from internet purchases. States such as Texas and California have been equally aggressive as states are losing billions of dollars from online purchases and need to recover the revenue somehow. Online companies have been protected by the definition of nexus and NY has taken a different approach in bringing affiliates into the mix but just attended a trade show in some states can constitute nexus for a company. I'm a consumer and want to see my dollars go as far as possible so buying online (especially big ticket items) is a way to avoid sales tax but keep in mind, we are all supposed to be paying use tax for those purchases which of course, almost nobody does. Although it will be incredibly unpopular with consumers, I think a universal sales tax is coming because states are becoming increasingly desperate to recover this lost source of revenue.
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borednerd, 25 Aug 2008 @ 8:25am

I spoke with a newegg rep, they're not returning the tax money collected during this time to NY residents. Makes me question where that tax money is going now.

I know I had several hundred dollars worth of taxes collected by newegg during the last month and a half, I'd be surprised if any of this money actually gets turned into the state.
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Denny Ferrassoli, 25 Aug 2008 @ 8:31am

+1 Newegg
I've always shopped at Newegg because of their kick ass customer service and fast delivery. After reading about this it's just another reason why I stick with them. Of course the gov will eventually make their way into taxing ecommerce, but if anything this shows that Newegg cares about their customers. Good job NE!
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Anonymous Coward, 25 Aug 2008 @ 8:36am

Re: Re:
Sorry you don't get it.

If she were elected president she would be in the forefront of applying this kind of stupid logic to all commerce in the US.
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Mitt, 25 Aug 2008 @ 8:38am

Re: Sales Tax
So let them go after individual taxpayers. For what - a few dollars per order?

Hiring staff and lawyers to do this would negate any possible gains.

Let's say the typical NewEgg customer spends $2,000 in a year. At 6%, that's $120. Hardly enough to pay for the hacks hired to chase them. It's probably safe to assume that most customers don't spend $2,000, so the amount they'd collect probably wouldn't even pay for the certified letters they'd have to spend.

This is what happens in a state dominated by Democrats. They want to tax the hell out of every one and anything. It's like that here in Mass under our Obama-lite governor, Duval Patrick and the overwhelmingly Democrat house and senate.

If you don't like Republicans, fine, but if you want higher taxes, keep the Dems in power.
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Jed, 25 Aug 2008 @ 8:53am

Re: Re: Sales Tax
I have no problem paying taxes in my local community/state.
What we need is a Democrat in the White House to ensure that the corporate tax loopholes get closed and our economy gets back on track. The billions that ExxonMobile should've been paying would do a lot more good than the tax on my Newegg purchases.
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Anonymous Coward, 25 Aug 2008 @ 8:53am

Re: Re: Sales Tax
So because Duval Patrick is black, that makes him "Obama-lite"? This type of racism is why the Republican party keeps losing more and more supporters.
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Anonymous N3rd, 25 Aug 2008 @ 9:02am

NewEgg
I've always bought my stuff from newegg, and seldom TigerDirect....but after this I'll only buy from NewEgg
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Jason, 25 Aug 2008 @ 9:07am

Sales Tax
As a former (and longtime) resident of Delaware, it always amazes me that states cannot find ways to circumvent the need for sales taxes. While DE may be small in size, it has a relatively healthy population density overall and as such, has high demands for infrastructure improvements. They can offer tax free shopping by way of corporate incentives which provide a business tax base as well as good paying jobs in the banking and insurance sectors (thus more revenue from state and city income taxes). Individual states are not "losing" money, they have been ignorant in how they formulate budgets based on estimated tax earnings. There are no guarantees that businesses will generate estimated earnings each year...so guess what, they make less, and because they have become so dependent on fluxuating consumer sales, they find themselves short changed. Well screw them....if they want to make up the money, let's see a flat tax where tax shelters for the richest on the country become a thing of the past and my $100 is taxed the same as Bill Gates' $100.

My $.02 dammit
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Haywood, 25 Aug 2008 @ 9:09am

Re: JC
"States such as Texas and California have been equally aggressive as states are losing billions of dollars from online purchases and need to recover the revenue somehow."

That logic is exactly what makes me want to go postal. You can't lose something you never had to begin with. Politicians would find a way to send every dime everyone makes, it's just that @ a 100% tax rate, no one would work.
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Anonymous Coward, 25 Aug 2008 @ 9:16am

Re: Erm...
If it is so important, how do you account for states such as Oregon, which has no sales tax?
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Michial, 25 Aug 2008 @ 9:39am

Re: Re: Sales Tax
Mitt;

It's not a matter of going after everyone, it's a matter of going after a few and setting huge examples...

Would you like to be one of the unlucky ones?
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CastorTroy-Libertarian, Lover, General Annoyance f, 25 Aug 2008 @ 9:42am

Re: Erm...
But that is the opposite of letting a Free Capitalist Economy run on its own, government Macro-control of consumption hurts it does not help.

So, there for the countries that do not tax internet sales is more developed from an Economics/Free system stand point than those that do.
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Anonymous Coward, 25 Aug 2008 @ 9:47am

Re: Re: Re: Sales Tax
I don't belive Mitt eversaid he was "Obama-like" due to being black. There are plenty of Liberal out there that are white and "Obama-like"

- And you are the reason stuff keeps getting stirred up, by automatic jumping to a conclussion not supported by the evidence presented but by saying if "Obama-like" is negative its a racial thing...not a policy thing
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Anonymous Coward, 25 Aug 2008 @ 9:59am

Re: Re: Re: Sales Tax
Love how you stay anonymous despite saying absolutely nothing of worth.
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Anonymous Coward, 25 Aug 2008 @ 10:10am

Re: Re: Re: Re: Sales Tax
To stir this up a little more, he didn't say "Obama-like" he said "Obama-lite" which implies a more racial connection... weeee for spraying water at beehives!!!
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Anonymous Coward, 25 Aug 2008 @ 10:28am

Re: Re: Erm...
"IMO your claim makes about as much sense if you interpret it to mean that sales tax revenues go to the fight against tuberculosis."

The claim that sales tax is used to control consumption is perfectly valid, there is really no question about it? The more you tax something, the less people will willingly use it. This has always been true and is one of the central doctrines on which our entire tax system is based. From subsidizing mortgages to discouraging smoking, the government uses the tax system to control consumption and behavior (as much as it is possible to do so). Just to be clear, I make no argument for or against this practice, I am simply stating that what he said is absolutely true and to some extent completely obvious.
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ReVeLaTeD, 25 Aug 2008 @ 10:28am

Well
Hopefully people realize...NewEgg will just increase prices to compensate for the fact they're not collecting it, and send the difference as tax to the state. In other words, not itemized, but still present. Same way Amazon does with its inflated non-Prime shipping rates.
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Anonymous Coward, 25 Aug 2008 @ 10:31am

Re: Re: Re:
"If she were elected president she would be in the forefront of applying this kind of stupid logic to all commerce in the US."

Says the great oracle of delphi . . . what baseless tales of the future will his all seeing eye reveal for us next . . .
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SgtBaxter, 25 Aug 2008 @ 10:33am

Huh?
"States are losing billions of dollars from online purchases"

Not from Newegg, they're not. I purchase from Newegg because the stuff I buy there isn't available at any store, anywhere. Believe me, I've looked as I'd rather physically look at something before I buy it.

Now that CompUSuckA is out of business, online retailers are about the only place left to buy computer parts. Best Buy is a joke, and they cost 2x as much for the trivial amount of parts they do carry.
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Anonymous Coward, 25 Aug 2008 @ 10:38am

I think what we need is an empty White House and no taxes...
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Killer_Tofu (profile), 25 Aug 2008 @ 11:04am

NewEgg
I love NewEgg.
They have also always been awesome with any needed returns.
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Kachinatrail, 25 Aug 2008 @ 11:05am

Re: Re: Re: Sales Tax
Jed
FYI It is the Congressmen and Senators that write TAX Code not the President. They may consider what any given President would like to have as code - but in the end every one of the some 400 representatives controlled by the Lobby's that control them dictates Tax Law - I IRS only follows what is written in the Tax Law. Oh, about Exxon/Mobile - no one every cared about the years they did not make a profit - Just like Stocks, Real Estate, Medical and Prescriptions, Fed and State Taxes and Cabbage Patch Kids - all get their golden ring on the merry-go-round of life - stabbing the consumer. Time for another Boston Tea Party.
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Anonymous Coward, 25 Aug 2008 @ 11:21am

Re: Re: Sales Tax
"This is what happens in a state dominated by Democrats. They want to tax the hell out of every one and anything. It's like that here in Mass under our Obama-lite governor, Duval Patrick and the overwhelmingly Democrat house and senate."

Hey wasnt Mitt Romney once the gov of your state? I guess Mass didnt have any taxes back then . . . ohh wait, yeah it did? I dont understand, hes a repubilcan and you seem to think only democrats tax citizens (republicans just borrow to support thier big government plans)? Ohh nevermind, I am sure someone else put him up to it, a libral legislature maybe or evil lepricons or whatever . . .
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Rick, 25 Aug 2008 @ 11:24am

Re: Re: Sales Tax
Yep, keep the republicans in power and drive up the deficit instead of paying a few more dollars of tax
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Anonymous Coward, 25 Aug 2008 @ 11:25am

Re: Re: Re: Re: Sales Tax
"Jed
FYI It is the Congressmen and Senators that write TAX Code not the President. They may consider what any given President would like to have as code - but in the end every one of the some 400 representatives controlled by the Lobby's that control them dictates Tax Law - I IRS only follows what is written in the Tax Law. "

How does a bill become law? I am pretty sure the legislative branch cant do it alone . . . LOL? The President MUST SIGN THE BILL INTO LAW and he has the power of VETO.
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Anonymous Coward, 25 Aug 2008 @ 11:38am

"...Now that CompUSuckA is out of business..."

No they are not, They were bought buy another great online merchant "TigerDirect"
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Anonymous Coward, 25 Aug 2008 @ 11:39am

"...Now that CompUSuckA is out of business..."

No they are not, They were bought by another great online merchant "TigerDirect" I have used them for years and never had any problems, I use "Newegg" also for the same reasons.

http://www.compusa.com/
http://www.tigerdirect.com/
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Anonymous Coward, 25 Aug 2008 @ 11:47am

Re: Re: Re: Re: Re: Sales Tax
he said "Obama-lite" which implies a more racial connection...

No it doesn't. It just means it's a watered down version of Obama. Like Miller Lite.
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Anonymous Coward, 25 Aug 2008 @ 11:49am

Re: Re: Re: Re: Re: Sales Tax
LOL Your rite! Congress can't do any ting without a president; there's defin itely no way they can get by a veto!! And if the president wants something to be law it will be because he's the president.
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Anonymous Coward, 25 Aug 2008 @ 11:50am

Re: Re: Re: Sales Tax
I'd rather owe it to you than cheat you out of it.
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bennington, 25 Aug 2008 @ 12:02pm

Sales Tax always paid by Seller
No sales tax can be shifted from seller to buyer -- so it's always the out-of-state seller (like NEWEGG) actually paying the sales tax, not local NY residents.

Sale prices are only determined by Supply & Demand. If businesses could so easily shift a new sales tax to buyers in the form of higher prices --they would long ago have raised their prices, earning easy extra profit.

It's fundamentally illegal for state politicians to impose a sales-tax if the point-of-sale is outside their legal jurisdiction; though they often do so anyway

The out-of state sellers don't get to even vote in the taxing state {'Taxation without Representation'}... and do not benefit from the "local services" supposedly paid for by the sales-tax.

For internet sales, if the seller is physically located outside a given American state/municipality... then the seller is not under the legal jurisdiction of that government entity -- and can NOT be taxed. The point-of-sale is outside the legal tax district.

An internet point-of-sale is where the 'sale transaction' is actually conducted/recorded... normally at the seller's own computer servers -- if they are physically out-of state... they are not taxable. Interstate telephone/catalog sales worked that 'tax-exempt' way for many decades -- until politicians got greedy and ignored the "Commerce Clause" in the U.S. Constitution.
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Anonymous Coward, 25 Aug 2008 @ 12:33pm

Re: Re: Re: Re: Re: Re: Sales Tax
"LOL Your rite! Congress can't do any ting without a president; there's defin itely no way they can get by a veto!! And if the president wants something to be law it will be because he's the president."

Your getting desperate now . . . when was the last time congress over turned a veto (when was the last time a tax bill was vetoed . . . LMAO?) . . . yeah this should take a while hehe. You can let cowardly executives shirk the very repsonsiblity they asked you to give them and attempt to "pass the buck" on tax laws, spending or anything else if you like, but NO BILL BECOMES LAW in this country without thier WRITTEN APROVAL (in the form of a signature).
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Anonymous Coward, 25 Aug 2008 @ 12:36pm

Re: Re: Re: Re: Re: Re: Sales Tax
"No it doesn't. It just means it's a watered down version of Obama. Like Miller Lite."

Or my personal favorite, McCain is Bush Lite and no one likes the taste of that stuff LOL . . .
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tubes, 25 Aug 2008 @ 1:21pm

Re: Re: Sales Tax
Why did you have to bring Asses & Elephants into this. The asses might tax but do you realize that the evil elephants runnin shit right now have BORROWED more money than we will ever 2 payback.
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Anonymous Coward, 25 Aug 2008 @ 3:18pm

Re:
No they are not, They were bought by another great online merchant "TigerDirect" I have used them for years and never had any problems, I use "Newegg" also for the same reasons.

Tiger really is awesome. I'm a long time supporter of them. Another one is Pricewatch. Lots of deals on OEM/white-box products there.

http://www.PriceWatch.com
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JJ, 25 Aug 2008 @ 4:38pm

Re: Will they then refund the tax?
No, but they're offering $10 credit for each order placed during the time frame...
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Pytheus, 25 Aug 2008 @ 9:27pm

Re: Re: Sales Tax
Reason why Dems have to tax is because the republicans spend spend spend without having the money to back it up. So then you end up with Democrats having to clean up the mess. How are we suppose to pay for this war we are having? Higher taxes are our responsibility. If you didn't want to pay for this war then we should've stopped it sooner.

Republications tax us as well, famous word from Bush Sr. No new Taxes became a lie. But the kicker is Repubs want to tax the middle class and give breaks to the rich. Dems want to tax the rich and give breaks to the middle class.
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Anonymous Coward, 26 Aug 2008 @ 10:55am

"How are we suppose to pay for this war we are having? Higher taxes are our responsibility. If you didn't want to pay for this war then we should've stopped it sooner. "

Republicans don’t pay their bills, everyone knows that (ask anyone who ever loaned Tom Delay money). It's the party of vacuous talk (I mean how long have they been "pro life" LMAO yeah right – how stupid are those people anyway?), its totally symbolism over substance. Wear American flag pins, but don’t actually raise enough in taxes to provide soldiers with Kevlar vests or properly armored vehicles, waste millions interfering in a most personal and private family matter to save Teri Shivo from her loving husband and last wishes but god don’t try to actually fix the healthcare system. They rail on endlessly about the evil “homosexual agenda” (which I suspect has something to do with the GAP) then hire a homosexual prostitute to pretend to be a reporter and throw softball questions to the president (not to mention the endless “Craig” scandals on the right – ohh it’s the Gay Ole Party alright), on and on and on it goes. The truth is though, both parties are big government, big spenders, it’s just that the democrats are more honest . . . that’s really the only difference.
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Britney Speares' Stretch Marks, 26 Aug 2008 @ 12:19pm

Re:
They don't tax it because they "use infrastructure". That's already handled as a good little local citizen via state income, business, gasoline, shipping, sales, and other taxes.

This is about getting more money from small groups (business) to hand out to larger groups of people in exchange for votes.

In any other industry, politicians and their voters would be jailed for consipracy and conflict of interest.

There, I said it. Deal with it!
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Anonymous Coward, 26 Aug 2008 @ 12:41pm

Re: Re: Re: Re: Sales Tax
"I'd rather owe it to you than cheat you out of it."

The end result is the same. Also, I fail to see how doing your part to support the country you love through taxes is considered being "cheated" . . . .
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Britney Speares' Stretch Marks, 26 Aug 2008 @ 1:13pm

Re: Re: Re: Re: Re: Re: Re: Sales Tax
I'm white and read "Obama-lite" as "Current bigshot tax and spend liberal Democrat-lite", not as some racist thing.

I.e. judged by the content of their character, not by the color of their skin.

And no, this isn't a comment on the applicability to them, or the validity of, "tax and spend."
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fewcherstar, 29 Aug 2008 @ 1:12pm

Re: Will they then refund the tax?
Unfortunately, no they will not. I just got finished with chatting with a newegg rep and was told to 'Consult a tax professional for further inquiries'.

This raises the question of what are they doing with the tax already collected? I was seeking a refund of about $150 for purchases made within the timeframe that newegg was being 'compliant' with the Nazi tax law. I was basically told to stick it.
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Politics, 7 Sep 2008 @ 5:27pm

Re:
I hope this means you're not voting for Obama! Lol.
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Anonymous Coward, 7 Sep 2008 @ 5:29pm

Re:
You're completely delusional.
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butonemike, 25 Feb 2010 @ 10:00am

Re: Will they then refund the tax?
I'm a few years late but... LOL! I'm preeeeetty sure the taxes they collected during that period were forfeited to NYS coffers. NewEgg is made of win, not free money.
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