New York Senate Votes to Repeal Amazon Tax – Full Text

Tuesday I broke the story about the fact that the New York Senate had Voted to Repeal Amazon Tax. I had gotten info by email that I thought had come from the National Retail Federation’s July 11th newsletter, however the full article was only available to members, so I only quoted a small part of it but promised to try to get permission to print article in it’s entirety. I was able to secure reprint rights, so I can share the full article with you now.

UPDATE 8/1 NY Amazon Tax REPEAL UNLIKELY per New York Times

New York Senate Votes to Repeal Amazon Tax
Copyright 2008 National Retail Federation – Reprinted with Permission

“The New York state Senate has voted to repeal the controversial “Amazon Tax” that went into effect last month requiring out-of-state Internet merchants with affiliate sellers in the state to collect sales tax. But it is unclear whether the repeal measure will be approved by the state Assembly.

Senators voted 44-18 to approve S.B. 8638 on June 24, the day after the measure was introduced by the Senate Rules Committee. The bill would immediately repeal the month-old tax.

Under a 1992 U.S. Supreme Court ruling, Internet and mail-order retailers are required to collect sales tax from out-of-state customers only if they have a “physical presence” – usually defined as a store, office or warehouse – in the customer’s state. But a New York law that went into effect June 1 takes the position that affiliate sellers – independent web sites that link to an on-line retailer’s products in return for a percentage of the sale – should be included in the definition of physical presence. The measure requires Internet retailers to collect sales tax from New York customers if they have an affiliate seller based anywhere in the state even if they don’t have any other physical presence in the state… Continued below…

The new law has been dubbed the Amazon tax because it was sought by bricks-and-mortar booksellers who complained to state legislators about competition from on-line bookselling giant Amazon.com, which uses large numbers of affiliate sellers across the nation to help drive traffic to its web site. Amazon and Overstock.com, another large on-line seller that uses affiliates, have each sued New York, saying affiliates do not amount to physical representation within the state and that the New York law is therefore unconstitutional under the 1992 ruling.

Sponsors of the repeal measure say a number of on-line retailers are severing ties with New York affiliate sellers in order to avoid coming under the new law. Amazon has continued to work with affiliates in New York and is collecting sales tax until the dispute can be resolved, but Overstock has cut off its ties with affiliates.

The repeal legislation has passed the Senate and has been assigned to the House Ways and Means Committee, but prospects for further action are uncertain because the bill has yet to find a Democratic sponsor in the Assembly. The New York Legislature is highly partisan – Republicans control the Senate 32-30, but Democrats hold a 106-42 majority in the Assembly that makes Democratic sponsorship an unwritten prerequisite for final passage of virtually any major legislation.

The Amazon Tax applies to companies with more than $10,000 in annual sales in New York. It is expected to generate about $50 million in annual revenue.

A number of states are reportedly watching New York closely and considering copying the idea. Legislation dubbed the “iTunes Tax” that would have taxed music downloads was introduced in California this year but was defeated in committee.

NRF supports the goal of presenting Internet sellers from having an unfair price advantage over local stores, but is concerned that the Amazon Tax could undermine a nationwide sales tax simplification effort supported by NRF over the past several years that would make physical presence a moot point.

NRF-backed legislation pending in Congress would allow states that have complied with a sales tax simplification agreement to require sales tax collection regardless of whether an out-of-state seller has a physical presence or not. The proposal would go far beyond the New York law by reimbursing retailers for the administrative costs of sales tax collection, establishing uniform definitions of taxable items, providing retailers with software and databases to tell them how much tax to charge, and setting up mechanisms to facilitate collection of sales tax across state lines.”

Copyright 2008 National Retail Federation
DO NOT RE-PUBLISH without their consent.

If you are a member I believe you can get to the article here.

Thanks go out to J. Craig Shearman at the NRF for giving me reprint rights to publish this article. He also was kind enough to give me the contact info for the lobbyists at the NRF that are working on the NY tax issues. If you are one of the leading people in NY trying to make headway on this issue, I’m happy to share the contacts.

After you read this post, if you haven’t yet be sure to read the post from earlier today. New York Amazon Tax Repeal – What NY Affiliates Can Do Now

2 Comments on New York Senate Votes to Repeal Amazon Tax – Full Text

  1. Below is a copy of a letter that I sent.

    Dear AssemblyPerson

    I am an Internet Affiliate marketer in New York. The New York Tax Law § 1101(b)(8)(vi)
    that started on June 1, 2008, which the New York State legislator passed and was signed into law by new governor David Paterson, is putting me and my fellow New York Affiliate marketers out of business.

    Everyday I receive dozens of e-mails from out-of state online Internet retailers telling me that I have been removed from their affiliate program and I should remove all links to them because I live in New York State.

    The new tax law gives these out-of state online Internet retailers only two choices. Sue New York State to have the law declared unconstitutional or terminated their relationships with their New York-based affiliates, affiliates who live in New York State. This law does not stop a New York State consumer from clicking on the link of an out-of-state affiliate and purchasing an item from an out-of state retailer. The out-of-state affiliate will not pay New York State income tax on this commission .

    This new tax law will not raise revenue for the state. Internet Affiliate marketers in New York cannot pay New York State income tax on commissions they cannot earn because of this law.
    This law will make out-of-state affiliates very rich since they no longer have to compete against
    New York State affiliates. New York State will be losing millions of dollars in income tax revenue that New York State affiliates have paid in the past.

    I understand in the hysteria that followed the resignation of the previous governor and the need to pass a budget, this poorly thought out legislation was passed. Now that you have had time to realize that the only people being punished by this tax law are New Yorkers, who vote for their representatives.

    I am asking that you introduce or vote for legislation that will correct this burden New York affiliates are suffering. I ask you to urge the Governor to suspend the enforcement of this law until corrective legislation can be passed.

    This legislation was the brainchild of the demented former governor whose criminal and scandalous behavior forced his resignation. Unfortunately this legislation didn’t die with him.
    It is now necessary to repeal it.

    New York State unlike the federal government may not print money. The failure to correct this unfortunate legislation will result in a great lose of revenue and will then require even greater cuts to government programs.

  2. Thank you so much for sharing your letter with us Easy Surf. Really hope this thing gets settled before it causes too many more problems for NY affiliates.

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