Tuesday, June 03, 2008

Here comes Internet Sales Tax

Beginning last Sunday, Amazon started collecting sales tax for the state of New York. What's more important to internet shoppers is that if they live in New York, they are now paying the sales tax that they always owed and the apparent advantage of not being forced to pay sales tax on internet purchases just evaporated.

The announcement from Amazon:
Effective June 1, 2008, Amazon.com LLC will begin collecting sales tax on items shipped to destinations within the State of New York as New York has enacted a new law requiring out-of-state sellers to collect and remit sales tax based on advertising. Amazon has filed a lawsuit challenging the constitutionality of this provision. However, as required by the law, we must still begin collecting New York sales tax beginning on that date.

Amazon has filed suit to challenge the expansion of New York's tax law. The expansion was that NY essentially declares that any company that has affiliates who refer business to them within the state of NY is essentially doing business in NY and therefore must collect, report, and deliver sales tax revenues to the state.

If Amazon loses it's challenge, which it seems is inevitable, then other states will surely jump into the fray. We can't say it's the right thing to do, but legislature's will feel compelled to devise ways to collect tax from internet retailers so that they can generate revenues for their own states. They will use the argument that they have been subsidizing the economies of California, Washington, and Oregon states for years by allowing them to conduct business unencumbered by sales tax. They will argue that collecting sales tax, which they will call lost revenue, will put local companies on an even footing with large internet retailers, removing the 5-9% price advantage internet shoppers enjoy by making their purchases over the internet.

Once New York's collection of sales tax on internet purchases is firmly established, then you can be certain other states will follow.

Note: Items sold by Amazon.com LLC, or its subsidiaries, and shipped to destinations in the states of Kansas, Kentucky, New York, North Dakota, or Washington are already subject to tax.

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