Friday - May 02, 2008

Is New York State Now The Federal Government?

That’s a strange and seemingly stupid question to ask, but I was certain that the regulation of interstate commerce was a power/duty reserved for the feds. A few weeks ago New York passed a convoluted tax that is going to require Amazon and other complex online retailers to collect NY state sales tax for them. While quite a few states have a Use Tax which requires citizens of that state to fork over tax money for everything they buy out of state, almost no one other than my mom actually complies, because it is obviously unenforceable. New York’s new “Amazon Tax” would close this “loop hole”, and if effective, would spread overnight to every other state, and the tax advantages of buying things on the internet would soon evaporate.

What makes the Amazon Tax interesting is the convoluted thought process behind it. Amazon is not one store anymore. Amazon is a reseller; more and more of what you shop for there doesn’t come from a place called “Amazon.com”, it comes from whatever Mom & Pop happens to have the product at the price point you want. Amazon simply redirects your order to the small businesses, and takes it’s little slice for that effort. There are tens of thousands, perhaps hundreds of thousands of these associated businesses, all over the country. Therefore, reasons NY, some of them must be in NY. Therefore an internet sale to Amazon from a customer in NY is a sale within NY so sales tax must be collected. Thus their new law.

There is a basic logically fallacy here which I can’t quite put my finger on. Something about not extrapolating from the individual to the general? Sounds close. Just because an Amazon affiliate is in NY doesn’t mean they are ALL in NY, so making a law requiring NY sales tax to be collected at Amazon is logically incorrect. And unconstitutional, by, as we have seen with Philthydelphia’s gun laws, that doesn’t stop laws from being passed at all.

New York has some of the highest taxes in the country, if not THE highest. The recent state budget is $122 Billion, for a state with a population of 20 million. This law is expected to collect about $50 million.

‘Amazon Tax’ Lands in New York
Controversial new law shifts collection requirement to online retailers in a move that other states could follow, but legal uncertainties abound. With the passage of the hotly debated state budget last night, New York legislators approved a bill that will require many online retailers to begin collecting sales taxes on purchases shipped to the state, even if they have no operations or employees working there.
New York Governor David Paterson is widely expected to sign the measure.  The so-called “Amazon tax” closes a loophole for Internet retailers who derive sales through affiliate programs in which Web site owners place a link to the merchant on their site and earn a commission on sales made from referrals. In lobbying for the bill, the industry group representing New York retailers had argued that the exemption from the sales-tax collection requirement gave out-of-state online retailers an unfair competitive advantage.
...
The controversial bill ends what for many New Yorkers had been tax-free online shopping, and experts predict that other states could follow suit with similar provisions. Consumers are required to report purchases they make online from out-of-state companies on their tax returns and remit a use tax, but many people are either unaware of that obligation or ignore it. Collecting those taxes from individuals has been an administrative impossibility.  New York expects the new requirement will generate about $50 million in revenue this fiscal year.
...
The tax was inspired in some ways by a 1992 ruling by the U.S. Supreme Court. In Quill v. North Dakota, the Court determined that out-of-state retailers cannot be required to collect sales tax on purchases sent to states where they did not have a physical presence. They argued that compelling merchants to adhere to the complexities of the state and local tax codes would place an unreasonable burden on interstate commerce.

With the new law, New York is taking an aggressive stance on the Quill ruling, claiming that a retailer such as Amazon holds a physical presence in the state because it derives sales through its affiliates who live there, explained Hugh Goodwin Jr., a state and local tax attorney and partner at the global firm DLA Piper.

Amazon is suing of course. My guess is that a mere 98% of the population supports their suit.

Amazon Sues New York State to Void Sales Tax Rules
Before the ink on the bill has even dried, Amazon.com has filed a suit challenging New York State’s new law that forces online retailers to collect sales taxes on shipments to state residents.
...
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.

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.
...
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. This is an extension of an existing rule that companies that employ independent agents or representatives to solicit business must collect sales taxes for the state.

Amazon’s suit challenges the constitutionality of this interpretation and seeks a declaratory judgment that it is invalid.
...
The online retailer further claimed that the new rules violate the equal protection clause of the constitution because it specifically targeted Amazon. “It was carefully crafted to increase state tax revenues by forcing Amazon to collect sales and use taxes,” the complaint says, noting that “state officials have described the statute as the ‘Amazon Tax.’ “

So there you have it. A new law, a new lawsuit. I’m sure Amazon can claim “proactive standing” as they will obviously be “injured” by this one. But that’s a side issue. Is New York overstepping it’s bounds? Does this law attempt to regulate intersate commerce through taxation? Why write such a law against Amazon - and it is against Amazon and other Big Business, because the law doesn’t apply to small companies that have less than $7400 per year worth of referral fees - when this kind of action would probably be more effective if written against the credit card companies and PayPal.

Personally I think it’s bullshit and I hope NY gets a swift boot in the ass in court. I understand it takes money to make government run, and that money has to come from taxes. But I think all Use Taxes are wrong, period. It’s my money. The state I live in already taxed me when I earned it, and they tax me again on what I spend within the state. That’s more than enought. What I spend out of the state is none of their goddammed business. They do not own my money and I can spend it how and where I please. Fuck off.

Posted by Drew458     on 05/02/2008 at 10:27 AM   
Filed Under: • Government • Corruption and Greed • Taxes •  
• Comments (6) • Trackbacks(0)  Permalink •  

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