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Amazon Fights Back Against NY Online Sales Tax 254

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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Amazon Fights Back Against NY Online Sales Tax

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  • by LostCluster ( 625375 ) * on Friday May 02, 2008 @05:28AM (#23272390)
    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.
  • A few thoughts... (Score:3, Insightful)

    by Antony-Kyre ( 807195 ) on Friday May 02, 2008 @05:43AM (#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).
  • by FurryOne ( 618961 ) on Friday May 02, 2008 @06:20AM (#23272504)
    It's time people faced the fact that they should be paying taxes on their internet purchases like anything else they buy. I don't want to, but I know I should. Taxes go towards all services you receive from your State, and when you don't pay them, they have to be made up another way. It's the irony of robbing Peter to pay Paul - 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. It's the only thing that's been driving the US for the last 12 years and more - And it's the reason the US has sunk to the status of a 2nd rate Nation (I'd use "Banana Republic" but we don't grow enough bananas here.) 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!
  • by Detritus ( 11846 ) on Friday May 02, 2008 @06:50AM (#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.
  • by budgenator ( 254554 ) on Friday May 02, 2008 @06:59AM (#23272638) Journal
    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.
    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!
    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
  • by dmgxmichael ( 1219692 ) on Friday May 02, 2008 @07:05AM (#23272660) Homepage

    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...

    No Tax or Duty shall be laid on Articles exported from any State.

    Now I'm no constitutional scholar - but I interpret the above to mean the states can't tax each other's exports. This will be challenged and it will end up in the Supreme Court.

  • 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 Social Security, I can understand the grumbles.

  • by d3ac0n ( 715594 ) on Friday May 02, 2008 @08:05AM (#23272934)

    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?

  • Re:I wonder if... (Score:3, Insightful)

    by electrictroy ( 912290 ) on Friday May 02, 2008 @08:13AM (#23272980)
    "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 cross the border and come get me. I don't think Pennsylvania would accept NY soldiers/officers marching across its territory in order to reach me in Maryland. Neither the PA nor the MD government is going to stand for an invasion from the NY government.

    So basically, the NY Tax Form is going in my Maryland trash can. (Along with any French or Canadian tax forms.) A foreign government can not tax non-residents. The NY government is foreign to this Maryland citizen, so the NY Legislators can go fuck themselves.

    (Note that the same reasoning applies to Amazon - Amazon is a citizen of California(?) and therefore can not be taxed by foreign governments.)

  • by LWATCDR ( 28044 ) on Friday May 02, 2008 @09:48AM (#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.

  • US Constitution (Score:3, Insightful)

    by Firethorn ( 177587 ) on Friday May 02, 2008 @10:03AM (#23274016) Homepage Journal
    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 out of state goods because it's actually a tariff. They WOULD be allowed to charge a tariff if, for example, they need to inspect something. Let's say NY decides all foreign food needs to be inspected for safety. They could levy a tariff to cover that. BUT, any excess(the tariff makes more money than the testing costs) belongs to the federal government.

    Yes, cities often put an extra tax on to cover their expenses. Food and medicine is often exempted*. NY is known for 'tax holidays' where they'll make clothing under a certain dollar amount tax free. It can get ugly.
  • by BASICman ( 799037 ) on Friday May 02, 2008 @10:14AM (#23274138)
    It wounds like there's alot of greed flowing around here... you alls wants no taxes, and the "evil" state is going to end the party.

    Frankly, New York State is in the hole. Most of its industry went overseas within the last two decades (no more glass from Corning, film from Rochester, shoes from Binghamton, etc.) and at times it seems like the entire economy of the state has shifted to New York City. Much of that work (and a nice chunk of the state's revenues) comes from the financial sector. Which is now in the toilet. So you not only have an ongoing economic collapse in NYC, but the rest of the state's economy got "shanghaied" long ago.

    The truth is, the State of New York is facing record deficits this year and needs to make up for the difference (it does not expect to be able to). And while the governor is recommending that municipalities consolidate to reduce costs, taxing internet retailers on sales in NYS is another way to get there.
  • by moshennik ( 826059 ) on Friday May 02, 2008 @10:51AM (#23274662)
    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 gimme, it's about keeping the money you worked hard for. If you feel like helping your state/federal government you can always send them a check...
  • by arminw ( 717974 ) on Friday May 02, 2008 @11:03AM (#23274884)
    ...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.
  • Re:I wonder if... (Score:1, Insightful)

    by Anonymous Coward on Friday May 02, 2008 @01:14PM (#23276754)
    I am a citizen of California first, then of the United States second. Yes I have duel citizenship. Look back at what people called themselves back in at the turn of the 19th century.
  • Re:I wonder if... (Score:3, Insightful)

    by dgatwood ( 11270 ) on Friday May 02, 2008 @01:40PM (#23277092) Homepage Journal

    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 decision from any remotely sane perspective.

    Allowing use taxes is tantamount to saying the government can arbitrarily restrict speech on the Internet because it is neither spoken word nor published with a printing press. The government saying "oh, but we're not really taxing the import; we're charging a one-time tax on the use of products that were imported," as though there were some difference between the two, is plainly silly on its face, and just gets sillier the deeper you examine it.... And before you say "Yes, but you could reexport it and not pay the tax," the same would be true of sales tax, as only the end user of a product pays sales tax, not someone purchasing it for resale. The only possible exception would be a purchase as a gift for someone, but then the recipient's state would claim that the recipient owes use tax, so in effect, again, it is just like sales tax. If it looks like a duck, quacks like a duck, walks like a duck, and smells like a duck, calling it a chicken does not make it so, and it's time the courts woke up and recognized this.

    Put it this way, I guarantee if they get to the point where they can track this stuff, if someone sets up a mutual exchange program where people can buy identical products and cross ship them each other in other states as mutual gifts, I guarantee they will see those gifts as tantamount to having bought the products for themselves. How, then, can the courts turn around and in the same breath say that this is not a sales tax on interstate commerce, since the products clearly would not, then, have been used in the state of purchase as use taxes require?

The road to ruin is always in good repair, and the travellers pay the expense of it. -- Josh Billings