CARS HOMES JOBS

Tax online sales just like local ones

Friday, April 5, 2013
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New York state did the right thing, by itself and all those bricks-and-mortar, taxpaying, job-producing local merchants, when it passed a law in 2008 allowing it to collect sales tax from online giants like Amazon that have no direct physical presence here. The law expanded the definition of physical presence, applying it to online retailers that pay “affiliates” with in-state websites to direct buyers their way through advertisements, coupons, etc.

We were glad to see the state’s highest court, the Court of Appeals, uphold it last week. We’d be even happier if Congress made state laws like this one unnecessary by no longer protecting Internet sales from taxation.

Conservatives in Congress, of course, are dead set against any new tax, even if it’s one that out-of-state businesses should be paying because their local competitors already are. In the absence of a national law requiring online retailers to collect sales tax for the states (which would be perfectly justified because these interstate sales fall under the commerce clause), the controlling authority is a 1992 U.S. Supreme Court ruling that said states and localities can only make out-of-state retailers collect sales tax if they have a “substantial nexus” to the state. The ruling was in a case involving mail-order companies, but Congress extended it to online retailers.

This has many negative effects. Not only does it disadvantage local merchants, who must by law collect sales tax on goods and services. It deprives state and local governments of badly needed revenue, which other taxpayers, including those very same local businesses, must make up. It’s a double whammy that can drive the locals out of business, further reducing the tax base and requiring the remaining businesses to pay more. A triple whammy.

Since adopting the law in 2008, New York state has managed to capture $500 million in sales tax revenue it otherwise wouldn’t have gotten. That’s a considerable amount, but it would be much more if the state could simply collect on all online sales, regardless of a physical nexus. Overall, the states are losing $12 billion annually on online sales, according to the National Conference of State Legislatures.

Tax policy shouldn’t determine where consumers shop. Nor should it determine where online retailers locate or with whom they do business (some will now move out of states that force them to collect sales tax and terminate relationships with affiliates in states with laws like New York’s.)

Congress should end the patchwork quilt of laws and level the playing field for all retailers. It can do so by passing the Marketplace Fairness Act of 2013, which would authorize any state that has simplified its sales and use tax laws to require out-of-state online merchants to collect and remit those taxes.

E-commerce is the fastest-growing kind. If it ever needed a break, it does no longer.

 
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comments

April 5, 2013
7:44 a.m.
wmarincic says...

Say everyone said alright to all of these new taxes..... Where would the money go? Would it be used to make the state solvent? No, it would be used to raise already bloated salaries and to start new duplicate programs...... In other words it would be wasted just like the tax money they steal from us now.

April 5, 2013
8:37 a.m.
hodgkins.t says...

Customers are already obligated to pay a use tax on all out of state purchases, so the internet tax is not a new tax, it is just a more efficient means of collecting the sales and use tax. NYS would be better off, in regards to the Marketplace Fairness Act, if we won the impending US Supreme Court case, but simpler tax codes are more efficient.

April 5, 2013
10:13 a.m.
albright1 says...

You want a level playing field? Eliminate the NYS Sales and Use tax. We didn't have one prior to 1965. Now we have it and the Gazette acts like it is money that belongs to NYS. It is not. It is money that belongs to "we the people" that NYS confiscates from us. Taxing internet sales of businesses without NY Nexus is not going to hurt those businesses. It is going to hurt NYS residents.

April 5, 2013
9:07 p.m.
Newsworthy says...

Frankly, the arguments presented by the Gazette are a load of crap. Many internet merchants charge shipping, which greatly exceeds even New York's sales tax. People shopping online often have to pay for shipping to return merchandise, as well. These eliminate any supposed advantage online retailers might have over brick and mortar shops. In addition, online shoppers don't have opportunities that local shoppers enjoy, such as trying on clothes before they buy them, using display models of products, and more. Besides that, if a difference of 8% really makes a difference to buyers, most local retailers could simply reduce their prices that amount and make up the difference in increased sales.

Now, look at what real stores are doing. Virtually all retailers match competitors prices, so again, that 8% isn't enough to make a difference. Staples, for instance, will match it's online prices in it's own stores.

Next, New York State is not in the fund raising business. According to the U.S. Constitution (paraphrased), government is only supposed to raise the minimum revenue necessary to meet it's operational needs - not looking for new revenue sources that allow greater spending. Instead of seeking more more money, New York State should be cutting spending - drastically. Its the thinking typified by the Gazette's editorial that contributes to the monstrous deficits facing our nation.

April 6, 2013
8:27 p.m.
Root_Beer says...

Tax Tax Tax, New York is King at taxing everything but big business. Oh if you tax big business it will move out of state costing jobs. So lets tax even out of state businesses but not pay them to collect NY taxes just like NY doesn't pay NY business to collect taxes for the state. How about we try telling those idiots in Albany to stop throwing money at useless programs and crazy pensions or look for a job out of state. I ran a small business and the NYS tax dept was a nightmare to deal with, unreliable information from them but always had both hands out looking for more money. Maybe I'll move out of state and spend my money in another state that has half the taxes and no wannabe King for governor!

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