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.
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