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Comments: 254 +-   Amazon Fights Back Against NY Online Sales Tax on Friday May 02 2008, @04:11AM

Posted by Soulskill on Friday May 02 2008, @04:11AM
from the fighting-the-good-enough-fight dept.
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The New York Times is reporting on Amazon's lawsuit contesting the recently enacted New York state law which requires online retail outlets to collect sales tax on items sold to the state's residents. Amazon disagrees that it should be required to collect such tax without a physical presence in the state. We discussed the 'Amazon Tax' last month. Quoting: "The new law is based on a novel definition of what constitutes a presence in the state: It includes any Web site based in the state that earns a referral fee for sending customers to an online retailer. Amazon has hundreds of thousands of affiliates--from big publishers to tiny blogs--that feature links to its products. It says thousands of those have given an address in New York State, although it does not verify the addresses. The state law says that if even one of those affiliates is in New York, Amazon must collect sales tax on everything sold in the state, even if it is not sold through the affiliate."
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  • I wonder if... (Score:4, Interesting)

    by Anonymous Coward on Friday May 02 2008, @04:24AM (#23272382)
    I wonder if Amazon could just refuse to sell items to people in NY state, and additionally drop all affiliates there (or at least stop accepting new affiliates). I'm sure all those affiliates (bit and small) would make some racket to their state legislators if they were cut off.

    Of course they'd never go that route, I think. It sure would be fun to watch, though. :P
    • I believe the easiest option for Amazon would be to simply drop all affiliates in New York. Refusing to sell to New York is financial suicide for them, but dropping all affiliates wouldn't cause too much grief from the public.
      • I believe the easiest option for Amazon would be to simply drop all affiliates in New York. Refusing to sell to New York is financial suicide for them, but dropping all affiliates wouldn't cause too much grief from the public.

        Perhaps this is part of the motivation behind Amazon's Kindle [amazon.com] device. If you're not sending something through the mail to an address in a specific state, but instead providing an electronic file to someone without any physical merchandise involved, wouldn't that mean state tax laws

        • Re: (Score:3, Insightful)

          "Services" are taxable under state laws. That would include e-files served to your Ipod or PC.

          As a seller (on ebay and amazon), here is my argument against paying NY Sales Tax:
          - I am not a resident of New York.
          - Therefore I am not under the jurisdiction of that government (same as I am not under jurisdiction to France or Canada)
          - Thus I am not an NY citizen; governments can not tax non-citizens.

          So I owe the New York government absolutely nothing for my ebay/amazon sales, and I'd like to see them try to cr
          • Re: (Score:3, Interesting)

            Maybe you should start demanding that your tax money be used to benefit you. Got a pothole in your neighborhood, then call NY and require they fix it with the tax money you are paying them.
            • Well you've definitely got the French anal retentive thing going for you. Magnifique!
            • Re: (Score:3, Interesting)

              And PLEASE stop comparing American states to countries: Canada != New York State. The United States are a country, like Canada, France or the Federated States of Micronesia.

              While we're more tightly knit than say, the EU, we're also a lot looser than most countries.

              So it's not 100% wrong. Besides, the US constitution could be considered the original NAFTA. Tariffs between states are strictly forbidden, and indeed, this could be considered a tariff.

              If I WAS amazon, I'd take it to court in that fashion. If
            • Re: (Score:3, Informative)

              ...A state that is taxing a sale taking place in another state...

              That is not the issue. If a NY resident buys something they are subject to NY tax, no matter where they bought it or how it was shipped to them, by truck or by wire. The sale takes place wherever the buyer lives.

              What NY wants to do is to force Amazon and others to be their tax collector, just as they do with stores physically in NY. The US Supreme Court has ruled that a seller has to be PHYSICALLY located in the state that wishes that seller t
              • Re: (Score:3, Interesting)

                >>>"The sale takes place wherever the buyer lives."

                Close but not wholly accurate. If I buy something in Maryland, where I live, I pay SALES tax. If I drive across the border, buy in PA or DE, and then drive back, I have to pay a USE tax. Two different taxes, depending upon if the item was purchased inside or ourside of Maryland jurisdiction.

                Amazon has to charge Sales tax for sales within its own state (where it has physical presence). It does not have to charge Use tax for out-of-state sales; t
                • Re: (Score:3, Insightful)

                  I would see the use tax as a lot more Constitutionally valid if it applied to all products used in the state. By prejudicially applying it only to imported goods, it is, in effect, nothing more than a thinly disguised way to apply sales tax on interstate commerce. While I realize a few appellate courts have upheld these blatantly unconstitutional laws, that's because of how many strict constructionalists the Republicans have packed into the courts in question. That doesn't make it remotely the right deci

                • Re: (Score:3, Informative)

                  ....The sale occured where the merchant received payment,...

                  Not strictly true. The sales tax is determined by residency and state law. When I, as an Oregonian, go buy something in either CA or WA, I don't have to pay their sales taxes, since we don't have sales taxes here. In WA they make it easier than CA. In WA I can just show the merchant my Oregon ID, proving I am indeed and Oregon resident. The merchant will make note of that ID and not charge the WA sales tax. It obviously make sense to do this only f
  • Doesn't the antidote to this seem clearer than day on this one? All Amazon has to do is ban publishers with payment addresses in NY... those big enough to care can simply reincorperate in a more tax-friendly state, those small enough not to matter will simply just go away.
    • That is right with one thing missing.

      As dropping those affiliates WILL cause some financial hardship, look for any problems with the law and sue to get it put down.

      If that doesn't work, then go the banning route.
      • That is right with one thing missing.

        As dropping those affiliates WILL cause some financial hardship, look for any problems with the law and sue to get it put down.

        If that doesn't work, then go the banning route.

        If I were CEO of Amazon, I would ban affiliates because it would impact New Yorkers. If I as a resident of Indiana write to a state congressman in New York protesting this law, they won't care because I am not there. If the NY residents complain, it will carry far more impact.

        Secondly, lit

    • by budgenator (254554) on Friday May 02 2008, @05:59AM (#23272638) Journal
      Firstly
      The question is whether the vendors must collect those taxes on behalf of the state. Generally, only those companies that have a physical presence, such as an office or store, in the state of the purchase are required to collect the taxes.
      By have a physical presence in NY, I'm deriving benefits from the state; Amazon without a physical presence in NY receives no state benefits and should not have to work as the states agent withput consideration.
      Secondly
      Amazon's legal obligations are dependent on the actions of a third party over which it has no contract or control. It would be like the county tax assessor telling your your property taxes will increase 25% on sunny days!
      Thirdly
      NY is the poster child for it's mishmash of sales tax laws, my understanding is that you can be liable for state, county, and municipal sales taxes in some places of NY, the chief obstruction to a coherrent, unified national state sales tax system is NY
      • ...
        Thirdly
        NY is the poster child for it's mishmash of sales tax laws, my understanding is that you can be liable for state, county, and municipal sales taxes in some places of NY, the chief obstruction to a coherrent, unified national state sales tax system is NY

        NC works the same way in that there is a state tax + count + city.. (atleast that is the option) 99.999999~% of citys all use the same sales tax and i have only ever seen it where the city or county would lower or not charge theirs for a short time.. (that is what the used to do in some areas for back to school time before the whole state agreed one one weekend where all school supplys are tax free)

        NY just likes to abuse it.. i am sure there are others states that have the same laws on the books and can

    • If Amazon gives in by banning NY retailers, they will lose the battle as other states pass similar provisions. They can't ban every state, and every state wants a cut of the pie.

      As a New Yorker, I'm offended by what (legally) appears to be an unconstitutional money grab. The problem is that very, very few people declare excise tax, and if they do it is typically for under $100 in goods.
      • If Amazon gives in by banning NY retailers, they will lose the battle as other states pass similar provisions. They can't ban every state, and every state wants a cut of the pie.

        Although they can't ban every state, would you want to risk that your state not get a piece of a pie. It might not be "the" pie, but a piece.

        Probably most of the money that affiliates make is not taxed/reported, but the larger affiliates are paying income taxes on their commisions. Second, even the money that is brought into the

  • A few thoughts... (Score:3, Insightful)

    by Antony-Kyre (807195) on Friday May 02 2008, @04:43AM (#23272426)
    Congress needs to act, since this is an interstate issue.

    I don't think New York has the authority to do this. But I sure would like to see the supreme Court act.

    One problem with sales tax is the complexity of the code. What states need to do is to create an out-of-state seller tax rate, which retailers could voluntarily choose to pay (instead of trying to figure out the specific taxing locale). It might be equal to the highest taxing rate in the state, and would be paid to the state with no locale attached to the revenue sent there. Then the state would divide the revenue up amongst their localities based on some sort of formula (perhaps based on in-state sales, for example, for percentages).
    • Re:A few thoughts... (Score:5, Interesting)

      by kamochan (883582) on Friday May 02 2008, @05:11AM (#23272474)

      And this would scale to global customers, how exactly? Chinese or Swedish or maybe Australian buyers paying average-US-state sales tax on their purchases?

      If something like this (the NY solution, or parent's) gets implemented for real, then online vendors will simply move out of the US to the land of the (tax-)free.

      It's internet commerce. Any solution needs to be globally viable, or it will be doomed to silliness. This is also why it's going to be darn difficult to solve.

      • Over here in Europe it's pretty common having to pay your country's VAT (plus customs fees) for imported goods. The same would work for offshore retailers sending goods to the US.
            • Re: (Score:3, Interesting)

              The state isn't taxing Amazon, though. They're requiring Amazon to collect taxes owed by Amazon's customers on behalf of the state. This is how all point-of-sale-collected sales tax works: its not owed by the retailer, but by the consumer, and collected by the retailer both as a convenience (no reporting/payment burden remains) and because consumers have proven remarkably unlikely to actually report and pay the tax themselves. If it wasn't for this, the only actual way to enforce a sales tax would be to
            • Indeed, specifically in the case of the sales tax, import tarriffs:

              No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.

              Basically, NY can't put a sales tax on o

      • Re:A few thoughts... (Score:4, Interesting)

        by maxume (22995) on Friday May 02 2008, @06:07AM (#23272674)
        Shipping through customs is going to be a lot worse than most sales taxes.
      • Difficult to solve? How so?

        I've worked in a company that used to sell via the internet (and postal mail before that). It was never a big issue before the internet, but the states are imagining millions going uncollected and that gives the money-loving pols a severe case of agita. [medterms.com]

        From a programming perspective, how hard is it to examine a couple of fields - country, state and zip code. All of the tax data resides in a table. The table is populated from data supplied via a subscription service - like now. Tha
      • Re: (Score:3, Insightful)

        This is also why it's going to be darn difficult to solve.


        Not difficult to solve at all. No taxation on goods sold over the internet. Done. See? Wasn't that easy?

    • >I don't think New York has the authority to
      >do this. But I sure would like to see the
      >supreme Court act.

      That seems iffy to me. Most of the goods I purchase at a store aren't from in state, but I still pay sales tax on them.

      Just because Amazon's store is online, doesn't mean that they shouldn't have to pay the same sales tax everyone else does.

      I live in Washington state, in Seattle, the same city where Amazon is based, and I already pay state sales taxes on Amazon goods.

      Maybe there is some legal lo
    • It would be easier just to allow the state the entity is shipping from to collect a sales tax, a closer parallel to the idea that you pay a sales tax to whatever state you (and the seller) are in when you purchase something in meatspace. Tracking sales taxes for all your buyers' states (and sometimes counties) is cumbersome, this is a far simplier option. And while it means NY doesn't get a sales tax immediately, it closes the loophole where no one pays a sales tax, a problem with all but a handful of state

      • That would still create problems.

        The state, in which the product originated (or where the business is headquartered), would want to collect sales tax.

        The state, in which the buyer is located, would want to collect sales tax on the item shipped to one of their residents.

        Ideally, I feel property taxes should deal with the origination, whereas sales tax should deal with the destination of a product.

        Also, in some states, if a buyer purchases something, and no sales tax is collected, sales tax is still due, and
    • Re: (Score:3, Insightful)

      ...But I sure would like to see the supreme Court act....

      They did, years ago, in the days of mail order. They decided that a seller has to have a physical presence in a given state, before that state can force them to become a tax collector for them. The Internet is nothing more than a hi-tech, more convenient mail order system.
  • It was already a law that residents had to pay sales tax on out of state items. But with no real way for the state to enforce it, most taxpayers are not going to bother.

    Also, per resident this is a very small amount, which makes it almost silly to bother reporting on your state tax return. According to the first article, " The provision is meant to contribute about $50 million to the $122 billion budget [nytimes.com]" In 2006, the population of NY state was 19,306,183 [census.gov]. By those numbers, each resident would be paying an
    • Technically it the USE portion of the sales-use taxes that would be collected by Amazon, so here's a delema, My mother in NY loves books so I buy her one for her birthday from California and have Amazon ship it to her in NY, so who pays the use tax to NY?
      • Re: (Score:3, Informative)

        You don't have to keep track of what you bought and claim that at the end of the year, unless you're a non-profit or buying things for business use.

        Yes, you do have to keep track of all purchases you made that you didn't pay sales tax on, in particular because the transaction occurred outside the state.

        From New York State Resident Income Tax Return IT-150 & IT-201 Instructions [state.ny.us] (Page 66)

        When do you owe New York State and local sales or use tax?

        When you make a purchase of taxable property or services

  • Just another unconstitutional NY state grab for out-of-state businesses' $ to get more coke and "entertainment" money. Apparently prices are going up there, too. If NY "wins" anything, it will be interesting to see if AMZN shows them the doghouse.
  • This is simply a jurisdiction (State, County or City) trying to make tax collection easier for themselves. I don't know of any jurisdiction with a Sales Tax that doesn't already have a corresponding Use tax, which is intended to tax anything that was purchased from out of Jurisdiction. Unfortunately, collecting that Use tax is difficult with the number of possible filers and the jurisdiction's desire to verify that the filers aren't under-reporting. Generally, they have dealt with this by going after bus
  • It's called the Constitution of the United States.

    In section 10...

    No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.

    And when we look back to section 9..

  • by Eevee (535658) on Friday May 02 2008, @06:38AM (#23272810)

    The new law is based on a novel definition of what constitutes a presence in the state: It includes any Web site based in the state that earns a referral fee for sending customers to an online retailer.

    It's not novel. In Zippo v. Zippo 952 F. Supp. 1119, the Court found Pennsylvania had jurisdiction over Zippo.com, a California-based company, over the fact it engaged in electronic commerce with 3,000 individuals and 7 ISPs located in Pennsylvania. In this case, Amazon is engaged in electronic commerce with numerous companies, via the referral fee, based out of New York--thus New York should have the same jurisdiction rights as Pennsylvania did.

  • Since when are resellers classified as an official presence by the vendor inside a state?
  • by 140Mandak262Jamuna (970587) on Friday May 02 2008, @06:52AM (#23272876) Journal
    NY could easily pass delivery tax and make UPS and Fed-ed collect the tax for them.

    However much I dislike the taxes, I hate discrimination and government loading the dice and making the playing field slanted. The brick-and-mortar companies in New York are obligated to collect sales tax for NY. That includes you corner diner and the mom-and-pop store selling used books. There was a time when compiling 50 state sales tax codes or even 25000 local county tax codes and making businesses outside complying with these code was technologically impossible. But now that excuse is not valid anymore.

    If Amazon does not have to collect the tax, none of the local businesses should have to collect the tax. If the local businesses must, then Amazon must too. It is a question of Government not playing favorites and creating walled gardens. It is not really a question of whether or not the the sales tax is fair or unfair. But I am not sure most people will see the distinction.

  • Loophole (Score:3, Interesting)

    by Jaime2 (824950) on Friday May 02 2008, @05:41PM (#23280534)
    Just buy everything with PayPal and have it shipped to yourself as a gift from a fictitious address outside of New York. If they solve this, then any non-New York resident could tax-bomb any New York resident by gift shipping all of their stuff to their own houses using a New York address as the giver.
    • The greed of the State.
    • Wow! You're so right, and so completely ethical! How can I help but be inspired by your rectitude? Lucky for us that huge corporations don't pull that kind of shit, or we'd be losing BILLIONS of dollars, not just a million or two here and there.

      Oh, wait...

    • by Detritus (11846) on Friday May 02 2008, @05:50AM (#23272600) Homepage
      If you want to talk about greed, let's talk about the state legislatures and localities that have an insatiable appetite for raising taxes. That's their solution to every fiscal shortfall. They seem to be unable to grasp the concept of "living within your means". Not satisfied with what they can extract from their own citizens, they want to force out-of-state businesses to do their dirty work for them. As far as I am concerned, they can all go to hell.
    • People that avoid paying taxes are actually stealing from everyone else in the State that now has to make up for the shortfall. Like it or not, it all comes down to one word - GREED.
      I'm sure we'll see hundreds of posts here on how this or that is illegal or unconstitutional, but like I said - it still all boils down to GREED - gimme, gimme, gimme - In money we trust!

      Some would say that it is unconstitional and a violation of the 13th Amendment [wikipedia.org] against Slavery [wikipedia.org].

    • But who's taxes?

      Where is Amazon.... It's a global company
      Where are their affiliates ... global
      Where are their customers ... global

      They already pay taxes on what they buy to re-sell they already pay company taxes etc ... they have no physical presence in NY so what are they paying taxes to NY for? what do they get back ... nothing?

    • Re: (Score:3, Insightful)

      Though I grew up in the U.S., I now live in Finland, where the state actually provides services in exchange for high taxation: excellent public transportation, generous unemployment and retirement, a monthly living allowance to students, free university education, a flourishing arts scene, and so forth. Paying taxes here is actually attractive. In the U.S., where people feel increasingly out of touch with their government, suspicious of the ability of police to actually do their job, and can't count on Soci

    • by LWATCDR (28044) on Friday May 02 2008, @08:48AM (#23273774) Homepage Journal
      How far do you want to take this? Should I have to pay sales tax to my home state if I buy a cookie and bring it across the boarder?

      The REAL problem with collecting sales tax for online sales has nothing to do with the customer paying the state. It has EVERYTHING to do with the burden on the retailer. Do you have any idea how big a mess the sales tax system in most places is?
      It can very from county to county and even from town to town in the county.
      So under your system let me show you how this would work.
      Any website that sells anything is going to have to register with not just EVERY STATE but every county and town. Each of them will require that you pay a fee to get your tax number... Oh joy.
      Then every quarter you will have to file a few THOUSAND tax reports. One per city, county, and state.
      Then you will have to have some way to decide which local gets the tax and what the rate is. Do you tax the shipping address or the billing address?
      So what your plan would do is drive every small web store right out of business.
      It is unconstitutional for the states to tax interstate commerce.
      So your little rant is just that a rant. Do we give to many tax cuts to the very rich and big companies? Yea I think so but this has NOTHING to do with that. In this case the tax break is going right to the consumer aka the little guy.
      Under your plan the burden would be on the small companies and the consumer.

    • Re: (Score:3, Insightful)

      Wow.. you sound like a such a bleeding heart liberal.. oh wait.. this is slashdot. Legally avoiding taxes is stealing.. that takes some balls of come up with. I call bullshit! It's my right to minimize taxes I pay in every legal way. Greed (as you call it) or free market capitalism (my preferred term) is has been not only driving this country, but also most of the civilized world. When did US, with the largest GDP in the world (right on par with the entire EU) become the 2nd rate nation? It's not about gimm
    • Apparently the state wants to sue Amazon. NY is arguing that having affiliates (in links) that live in NY constitutes a physical precense in the state. Amazon counters that it's overly broad, unconstitutional, and hard to enforce reliably.
    • by tgd (2822) on Friday May 02 2008, @07:32AM (#23273068)
      Um, some of us live in states that don't have sales tax.

      And we've got guns.

      And we believe we should live free or die.

      Just sayin'.

      (Actually I have no guns, but I think all my neighbors do...)
I am here by the will of the people and I won't leave until I get my raincoat back. - a slogan of the anarchists in Richard Kadrey's "Metrophage"