Amazon Fights New York Online Sales-Tax Plan

Published February 13, 2008

| Associated Press

Amazon.com is fighting Gov. Eliot Spitzer's plan to require out-of-state online companies to collect New York state sales tax on goods they send to addresses in New York — the most recent cash-strapped state to propose the tax.

Spitzer estimates in his budget that the state would gain $47 million by requiring Internet giants such as Amazon.com to collect state sales tax.

If that portion of the budget is passed, retailers will start being required to collect the taxes.

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New Yorkers are currently on an honor system to report their online spending when they file their state tax returns.

"This would be a radical departure from anything that's being done anywhere in the country," said Paul Misener, Amazon's vice president of global public policy.

The policy would apply 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.

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.

"We're not asking Amazon to do anything that any New York vendor does not already do," said state Tax Commissioner Robert Megna.

Other states, including California, Michigan, North Carolina and Texas have considered similar plans, but abandoned the idea, Misener said.

In November, Spitzer chucked a plan to collect the sales tax because he thought it was "not the right time" to increase the tax burden.

The state Department of Taxation and Finance quietly issued a memo last year that would have targeted companies that do online business in New York, but don't have brick-and-mortar presences.

The agency dropped the idea within days after news organizations began reporting on the issue.

But now it's made its way into the state budget.

"He included it in the budget so the legislature would be able to weigh in on it," spokesman Jeffrey Gordon said. "He determined that was a better process to go through."

At least 17 states have joined an effort to streamline taxes for collection by out-of-state companies, including North Carolina and Michigan. Another five states are planning to pass laws to comply with the Streamlined Sales Tax Governing Board.

The effort is designed to encourage Internet and catalog companies not only to collect state sales taxes but to send them on to the states where the products are delivered.

More than 1,000 companies that sell products in various states have voluntarily agreed to begin collecting and distributing sales taxes to any state that agrees to become a member of the project.

The state tax department considered participating in the project, but found that it would require the state to completely revise its tax law.

"A lot of changes would need to be done for us to comply with that," Gordon said. "It would make changes at the state level and also at the local level."

A 1992 U.S. Supreme Court ruling prohibits states from forcing businesses to collect the states' sales taxes unless the company has a physical presence in the state. The court noted the dizzying array of tax jurisdictions and widely varying definitions of taxable goods.

States argue that when businesses don't collect sales tax they create an unfair competition for local retailers, since customers can check out merchandise locally and then buy online to avoid the sales tax.

"I think it's way past time that Amazon.com collects sales tax," Jonathon Welch of the Buffalo-based independent book store Talking Leaves Inc. said in a written statement.

"It's a terrifically unfair advantage that has cost the states in which they operate a vast amount of money," Welch wrote. If the state is not collecting sales tax, they are collecting it in other ways. (The proposal would) even the playing field for us quite a bit."

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