New York to Implement an 'Amazon Tax' 411
theodp writes "NY Governor David Paterson is expected to sign a bill requiring online retailers to collect sales taxes on purchases shipped to the state, even if they have no operations or employees working there. The so-called 'Amazon tax', which applies to Internet retailers who derive sales through affiliate programs, would end what for many New Yorkers had been tax-free shopping and generate an estimated $50M in revenue this fiscal year. Experts predict that other states could follow suit with similar provisions."
Re:they can pass it all they want... (Score:5, Informative)
Re:How does this work? (Score:5, Informative)
Re:but I repeat myself (Score:5, Informative)
However, the out-of-state business is not obligated to automatically collect it - that's the interstate commerce part. You are supposed to self-declare it. How many people do you suppose keep detailed enough records to calculate this on their state income tax form? Or bother to declare any of it?
Re:How does this work? (Score:5, Informative)
Courts have determined that when you buy something through the mail, the sale takes place at the seller's location not the buyer's location. Hence, when a NY resident buys something from Amazon, the sale takes place where Amazon is based--in WA. The exception is if the seller has a "substantial business presence" in the buyer's state, in which case the sale is considered to have taken place there.
It's not even a question of the seller not being obliged to collect the tax. In the example, NY has no authority to tax sales completed in WA.
To get around this, many states have so-called use taxes that are typically equal to their sales tax rates. Use tax is collected when a resident brings a good bought out of state back into their state of residence. The rationale is that the use of the item is being taxed, not the sale of the item. In practice, states only routinely collect use taxes on cars, because it's typically part of the process of registering and titling a car in a new state.
Personally, I can't see how NY is going to be able to enforce this law. They can't compel businesses outside of their jurisdiction to collect and remit these taxes without some sort of federal law.Re:As much as I hate taxes . . . (Score:5, Informative)
There is little in the law that is "fair" when multiple separate legal entities all have sovereignty within their respective borders. Particular states are always able to compete for the dollars of other people by creating more favorable business environments.
I'm usually not in favor of defending federal control of something, but in the case of interstate commerce it makes a lot of sense to prevent individual states from denying access to their citizens of all the benefits of living in a confederation. If people go outside New York to shop, maybe it shows there's something wrong with the priorities of the New York legislature, rather than being "unfair" to local businesses.
Re:Lenovo anyone? (Score:2, Informative)
Arizona has a transaction privilege tax (TPT) that differs from a "true" sales tax in that the tax is levied on the gross receipts of the vendor and is not a liability of the consumer. (As explained in Arizona Administrative Code rule R15-5-2202, vendors are permitted to pass the amount of the tax on to the consumer, but remain the liable parties for the tax to the state.)
And Lenovo does have an office in Phoenix, so...
Re:How does this work? (Score:4, Informative)
If you look at most state personal income tax forms you'll generally see an area for calculating tax on goods purchased from other states or over the internet. I know off the top of my head that Wisconsin, Illinois, Colorado, Ohio and Utah all have some type of line for calculating Use tax on their personal income tax forms.
Re:they can pass it all they want... (Score:3, Informative)
How so?
It's basically two things: a use tax, and a scheme to collect it.
The Supreme Court cases on State use taxes are clear: they are Constitutional.
So that just leaves their scheme to collect. The obvious problem here is the Quill case, but they seem to have found a somewhat plausible argument to distinguish from that, so I could see this go either way on that.
Re:they can pass it all they want... (Score:5, Informative)
But, almost every state that has a sales tax also has an excise tax for people who import goods from out of state. For example, in most states if you import a car into the state then you pay the sales tax on the car even if you bought it in a state with no sales tax.
New York can very constitutionally tax goods that are used in New York. And it can reach Amazon to enforce it because Amazon has "purposefully availed" itself of the New York market by advertising there and shipping orders there. See the case Asahi Metal.
Re:It's already the law in Iowa (Score:5, Informative)
Why does NY want this new tax if they already have use tax? For two reasons:
Quite frankly, don't be surprised if new taxes like these appear all over the place. The plummeting economy and rapid devaluation of the dollar means that even states have to collect money where they can.
Re:they can pass it all they want... (Score:5, Informative)
There's a big historic difference between the two.
New York's tax is, for all practical purposes, an import tax.
Re:they can pass it all they want... (Score:1, Informative)
Those "use taxes" appear to be blatantly unConstitutional, too, by virtue of a part of the Constitution that explicitly says that a state may not tax imports unless
1. It has the permission of Congress
2. All of the net proceeds from the tax (after inspection costs) go to the Federal treasury. (NOTE - Federal, not State)
For the current crop of "use taxes", neither of those are the case.
Re:they can pass it all they want... (Score:5, Informative)
The terms "import" and "export" in the Constitution refer to imports and exports from other countries. See the treatise here [justia.com]: "Only articles imported from or exported to a foreign country, or âoea place over which the Constitution has not extended its commands with respect to imports and their taxation,â are comprehended by the terms âoeimportsâ and âoeexports."
Case: Hooven & Allison Co. v. Evatt, 324 U.S. 652, 673 (1945) [findlaw.com], holding that "These provisions were intended to confer on the national government the exclusive power to tax importations of goods into the United States."
Last I checked, Amazon shipped from within the US, so it doesn't apply at all.
Re:It's already the law in Iowa (Score:3, Informative)
Yup. And if Amazon had the smallest operation in the state of NY they would have to collect and pay NY taxes. But they don't so I'll be blown if I can see how the State of NY will be able to force a CA business to collect a NY tax, do all that bookkeeping and forward the money to NY. If they succeed it will destroy the last fig leaf of Federalism.
Re:An interesting problem (Score:2, Informative)
They couldn't even do that. Congress regulates interstate commerce, not the individual states. Since you have no presence in the state, and they can't apply state laws to you out of the state, there's really nothing they can do but ask politely for you to voluntarily pay these "taxes."
Re:How does this work? (Score:4, Informative)
Typically Federal is funded by Income, Medicare, Social Security, Capital Gaines, Fed Fuel tax, import/export tarrif, drug seisures.
State is typically funded by a State Income taxes (not all states have income tax), State sales tax (3-9%), State fuel tax, fees (license & permit). State funds typcially tend to pay for local infrastructure (roads, water, power, bridges), education, health care, arts, wild life reserves, etc. It's hard to say that the only ones that pay for those things because there is so much overlap from the cities and federal government.
County/Parish/City is typically funded by property tax (usually just land/house, though things like cars, boats, aircraft can be taxed as property), permit fees/licenses (building, business, etc), services fees (water, sewer, fire dept)
While I personally love no sales tax on the internet, it does bleed the State budgets of money, which of course creates new opportunities for the Federal Gov't to come in and pay the bills. Congress is never shy about using that money to blackmail the States in to doing what they want, by threating to withhold the funds. Federal highway funds have been used for years to push varies issues such as polution regs and drinking age limits.
Most people forget that the US is actually 50 different countries bound together by the Constitution. Each State in turn has its own Constitution which all are similar, but there are some differences. There has been a constant fight between State & Federal government over who is in control of what, generally who is in charge of the money. The Federal Government has been slowly creeping into what traditionally is State territory, sales tax just being the latest. Basically the only thing the Feds are supposed to do is protect the borders, raise a national army, print money, and regulate commerce nationally & internationally, and treaties.
What's funny these days the Fed's are a little on the broke side so many States are looking to go there own way again. Internet sales tax, education reform, polution, fire arm regulation (the federal government has very little actual say in this, though you wouldn't think so by what you see in the news), and drinking age being the hot topics of the day.
So that should make it clear as mud for you. If you did understand it all then there are many very high paying jobs waiting for you in the US.
Re:Oh please (Score:5, Informative)
Mail ordering has continued since then. In the late 1800's, many people ordered kit houses from the Sears catalog. Until the 1940's, if you didn't live in a city, you basically had to mail order many products.
Re:It's already the law in Iowa (Score:2, Informative)
Re:they can pass it all they want... (Score:1, Informative)
Article 1, Section 10.
Re:they can pass it all they want... (Score:5, Informative)
* note that a key fact in the Asahi case was that Asahi was the manufacturer of the product in question.
Re:You're missing the key point... (Score:3, Informative)
US States are sovereign (Score:4, Informative)
It's really best to think of the US Constitution as a treaty between the states that allows for the creation of a strong federal government but with limited powers. Thus, the commerce clause argument that both left and right wingers always have.
The only reason that the USA wound up with a strong federal government was because the previous "federal" government, the Articles of Confederation, was an abject failure and almost doomed the USA to perpetual inter-state bickering. The US Constitution changed all that, and eventually, the EU will most likely evolved into something like it.
Re:You're missing the key point... (Score:3, Informative)