Inevitable post on New York’s “new Amazon tax”

Dear NPR’s Jim Zarroli,

It’s true that New York recently passed a law explicitly requiring Internet companies like Amazon, with web affiliates located in the state, to collect sales tax from their New York customers, and that this law went into effect over the weekend.

Nevertheless, the thesis undergirding your story — namely, the contention that “Until now, firms that didn’t have a store or other physical assets in the state were not required to collect the tax,” and the insinuation that U.S. Supreme Court precedent prohibits New York from seeking these sales tax dollars — is wholly erroneous.

The Supreme Court established in the 1960 case of Scripto v. Carson that an independent contractor’s sales solicitation or service activities on behalf of a company in a state create a connection sufficient to allow that state to impose sales tax collection responsibilities on the company. In other words, it has long been clear that, by using a salesperson or service provider in a state, a company constitutionally can be required to collect sales tax on all sales made to customers in that state. See also, just for instance, Tyler Pipe Inc. v. Washington Dep’t of Revenue, 483 U.S. 232 (1987).
 

Consequently, there is a fairly strong argument that New York did not even need to pass a law to begin imposing collection duties on Amazon and other Internet retailers who have sales affiliates in the state. Indeed, as GMB points out in email:

The law that was passed simply created a rebuttable presumption that an outside/online/remote vendor had sufficient nexus with NY to require it to collect use tax if it had certain relationships with residents here (i.e., that affiliate relationship that Amazon has). It’s right there in the bill.

 

Late last year, before the law was on the table, the New York State Department of Taxation and Finance announced that these retailers would be required to collect and remit sales and use taxes on all sales to New York customers. Former Governor Spitzer, facing bad press for this and other aggressive policy announcements, backpedalled. Now the law is on the books, and the issue is out of Governor Paterson’s hands.

It might have helped to talk with someone at the Department of Tax and Finance, or at least to devote more than 1 minute, 22 seconds to this complex subject.

Just a thought.
Maud Newton
 


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