Another interesting facet of the memo:
This memorandum is intended to clarify current policy and does not reflect any change in requirements for vendors doing business in New York State. If an out-of-state business should have been registered based solely on the information contained within this memorandum, but was not registered, the department will not assess any prior sales taxes due or any civil or criminal penalties or interest for the failure to collect and remit any prior sales tax due, if the business registers and begins collecting sales tax by December 7, 2007.
Translation: Register and start collecting by December 7, or we’re going after you for all prior years.
Quick clarification: If you’re a link affiliate of Amazon or some other bookseller, please don’t panic. The Department is going after the retailers, not after you.
And a further update: The Governor apparently has told the Department not to pursue this, after all. I just left this comment beneath Times’ announcement:
Despite insinuations to the contrary from the New York Sun and others, in no way did this policy announcement amount to the imposition of a new tax.
Contrary to popular belief, the Internet Tax Freedom Act does not shield Internet purchases from tax. It is entirely misleading to say, as Danny Hakim so glibly does here, that the administration announced a plan to “start charging sales tax on Internet purchases.”
Indeed, New York residents owe tax on every book, CD, and other physical item they purchase from a web-based retailer who does not charge the tax. The trouble is that most people are not aware of their obligation to pay the tax — which in this instance is called a use tax — and it is a logistical nightmare for the state to enforce it. (Next time you’re filling out your New York income tax form, pay attention and you’ll notice that the Department actually asks you to list any purchases ordered online for which you did not pay tax. This line was added several years ago in the hope that it would increase residents’ awareness of their use tax obligations.)
The failure of Amazon and other big-box Internet retailers to collect and remit the tax penalizes both mom-and-pop establishments in the state and other major retailers like Barnes & Noble, which, due to its physical locations in the state, does collect the tax.
Affiliates of Internet retailers as described in the memorandum are representatives of the retailers under Supreme Court precedent that goes back decades to the case of Scripto v. Carson. Retailers with these programs benefit from the solicitation activities of their representatives in the state and therefore should be required to collect taxes on their sales into the state.
I’m disappointed that the Governor has tied the Department’s hands here.
Thus concludes our posting on the MaudNewton.com Tax Obsession of 2007.