Here Comes the Amazon Tax

Attention all NY State residents. Starting June 1st, Amazon will start charging 8.375% sales tax on your orders to be compliant with the new internet tax law proposed by former Governor Spitzer and passed by current Governor Patterson. Amazon is suing the state in NY State Supreme court, but until then we will be stuck paying. Place your orders now and anything shipped before June 1st will not be taxed.

The quick and dirty history on this tax law is this:

• Catalogs have long been exempt from sales tax if they do not have any physical presence in that state.
• Internet retailers were given the same exemption and Bush extended that exemption to 2014 with passage of Internet Tax Freedom Act:
  “[n]o State or political subdivision thereof may impose any of the following taxes during the period beginning November 1, 2003, and ending November 1, 2014: (1) Taxes on Internet access and (2) Multiple or discriminatory taxes on electronic commerce.”
• Spitzer found a loophole by considering any Amazon associate member living in NY to be considered a representative of Amazon, thus give Amazon a presence in NY State and making their sales subjected to NY State Taxation.
• NY State sales tax is 4% and each county tacks on their own tax, but the law requires Amazon to charge a flat 8.375%. If a NY State company charged a flat rate across all counties of NY they would be fined. No word on if items exempt in NY will also be exempt on Amazon, such as clothes.

The justification by the state hinges on the Amazon Affiliate program.  To me, the affiliation is a glorified advertising campaign.  Affiliates handle no merchandise and they do not collect money for Amazon.  Amazon pays them based on referrals.  By this reasoning shouldn’t any company that advertises on a NY website or in a NY publication be subjected to NY State taxes on their ecommerce sales?  The truth of the matter is that NY is not interested in other website and they have even referred to this law as the “Amazon Tax”.  They have tried taxing internet sales before, but with no legal footing they added a voluntary tax assessment to NY State’s income tax forms.  Obviously that did not work well and with no legal recourse to force NY residents to pay, they decided to take on the biggest target.

In the end, I expect Amazon will win and NY will have to pay for ALL legal fees of both parties.  They will have wasted a lot of time and tax payer money on this illegal venture.