New York Governor Eliot Spitzer wants all online retailers to collect tax on New York sales, even if the retailer is not based in the state.
In online commerce, consumers are supposed to pay tax on their purchases if their state normally collects a sales tax. This has not been enforced outside of companies with a physical presence inside a state, an example being dsports.com, which will charge me 6 percent Kentucky sales tax when I buy a Giants Super Bowl Championship hat from their website.
Purchases on Amazon don’t trigger a sales tax charge, since Amazon is based in Washington state. I will have to fork over a few bucks as an honest citizen at tax time for buying a few things on the site in 2007.
Spitzer’s position as noted in the Bits Blog would make Amazon do the tax collecting instead of relying upon the citizenry to remember those purchases at tax time and fork over the required tax dollars to Albany, in New York’s case. Amazon wants no part of that.
New York State will try to get around the inconvenient court ruling that permits Amazon to avoid collecting taxes. Bits blogger Saul Hansell said Spitzer and crew will try to classify any business with an affiliate program, and at least one member in the state, as qualifying it to collect sales taxes.
The technology for collecting taxes online has been in existence for some time. Wal-Mart’s website does so, as do plenty of other companies. They rely on specialized software to do so; Netflix CEO Reed Hastings cited Vertex Inc on Bits as a program to accomplish this.
It’s a contentious issue that will become even more so, as people argue the merits of paying tax to a state that does not provide services to an out of state retailer, as some Bits commenters argued. Habitually cash-strapped states will probably try to follow New York’s lead, if Spitzer succeeds.
