New York State to Collect Onlien Sales Tax

**talkgold** · #1 04-25-2008, 02:04 PM

ALBANY - A new state law requires out-of-state Internet retailers such as Amazon.com to begin collecting sales tax on purchases made in New York State.

State budget officials estimate the law, passed as part of the state budget earlier this month, will bring in $50 million this year and $73 million next year from online sales. That will help balance the budget and offset declines in the personal income tax, officials said.

The state has sent notices to the 500 largest e-tailers in the state, saying they have to register and begin collecting sales taxes by June 1. Companies must comply if they do $10,000 worth of business in the state and have agents within the state acting on their behalf. If they don't comply, the state can audit and assess them for past liabilities.

Although it's a large site, eBay is a marketplace and therefore would not be required to collect sales taxes, officials said. However, if retailers on eBay meet the criteria of $10,000 with agents in New York, they would have to collect taxes.

Previously, if a company did not have a physical presence in the state, it did not have to collect the tax. However, the state now is saying that if one person in New York is serving as an online agent, the company must collect the tax.

"It's about time," said Richard Klein, owner of the Book Revue, an independent bookstore in Huntington. "All we ask as independent retailers is fairness, and it's patently and obviously unfair if we have to compete with the handicap of charging sales tax when our competitors don't."

James Sherin, president of the Retail Council of New York State, agreed. "This is a first step in our ongoing battle to level the sales tax playing field between New York retailers and the out-of-state Internet giants that have, for years, capitalized on an unfair and unintended competitive advantage driven solely by tax policy," he said.

However, in an interview in February when the state was considering the law, Amazon.com Vice President Paul Misener called the measure a tax increase on consumers. "This is the wrong time to increase taxes on New Yorkers," he said, questioning the constitutionality of the law, but declining to say whether the company will challenge it in court.

Amazon.com representatives declined comment Wednesday, saying they were still reviewing the language of the law.

Many observers have speculated that the law will be challenged, pointing to a 1992 U.S. Supreme Court ruling that said out-of-state retailers could not be required to collect sales tax unless they had a brick-and-mortar presence in a state.

Then-Gov. Eliot Spitzer originally proposed the idea, but dropped it last fall. Gov. David A. Paterson included the tax in the state budget so the Legislature could weigh in, according to a budget spokesman.