Amazon To Charge NY Sales Tax June 1 (1 Viewer)

[Phil A]

For all those who may have trouble sleeping at night and need some light reading mat'l to help you get to sleep fast, here's a link to major sales tax nexus cases:

http://www.mtc.gov/Nexus.aspx?id=1362

 

[Will_B]

Nonetheless, that is exactly what Amazon is doing -- they're keeping the Amazon Affiliates program alive while they contest the statute. Probably because to end the Amazon Affiliates program (or even end it in New York) would be seen as Amazon essentially saying that the statute is indeed valid in Amazon's eyes. And Amazon cannot concede that, or else other states where Amazon has no physical presence will follow suit.

I believe if they lose, they will end the Affiliates program, at least in New York, as a way of saying "FU".

 

[Michael Reuben]

But as I noted in the rest of my post, ending the affiliates program may have no impact. And in any case, the suit will take years to reach a conclusion. A lot can happen in that time.

M.

 

[Will_B]

What do you mean, ending the affiliates program would have no impact? It would completely eviscerate New York's ability to charge sales tax in New York, since it is New York's contention that the Amazon Affiliates who are based in New York constitute a presence in New York! New York could just as well try charging a person who has no car an excise tax for their car registration.

 

[Dennis Nicholls]

I do this. The problem is that you sign your return under penalty of perjury as being complete and accurate. A perjury rap would get me disbarred so I send in a couple of hundred miserable bucks a year in liu of trying to fight it.

 

[Michael Reuben]

I didn't say "would"; I said "may". Besides, New York is already doing the equivalent of charging a person who has no car an excise tax for their car registration. Under any reasonable construction of applicable precedent, the affiliates program cannot constitute presence for purposes of sales tax law. If some ultimate authority such as the Supreme Court were to reverse prior precedent and hold that it does, we would be faced with an entirely new definition of "presence" that would be substantially more ethereal than the one that currently exists. If so, it is not at all clear that, having once established "presence" through something like the affiliates program, one could simply withdraw it by canceling the program. Indeed, "presence" would have become so attentuated a concept that it could be pretty much whatever a state decided to call it.

I concede that these are highly speculative matters. The reason that they're highly speculative is because the concept of "presence" propounded by the amended NY statute is so utterly vague -- unconstitutionally so, if you read Amazon's complaint carefully. That's a big part of the problem.

M.

 

[Chris Lockwood]

>> sales tax should be based on where the vendor is not where the purchaser is
> Maybe it should be, but that's not how it works, and it never has.

Actually, that IS how it works in the real world.

I live in Florida. If I go to Denver and buy something, they charge me Colorado sales tax (plus city and county, if applicable). They don't ask me where I live, and they certainly don't send tax payments to my state.

Also, if I buy something via mail order from Denver from a company that is only located there, they don't charge sales tax on it since I don't live in there state.

That's the way it's always been, so don't tell us the opposite.

I'm pretty sure Supreme Court rulings agree with me on this.

That's how it should be online, if taxes are to be collected. The other way is a nightmare for small business, which the boneheads in gov't need to understand.

 

[Michael Reuben]

As an attorney, I'm always interested in continuing legal education, so I look forward to your citations.

I'm not sure why you're arguing with me. Anyone who's actually read my posts here should know that I think this latest NY effort is dead wrong.

M.

 

[Ted Todorov]

Hi Michael,

overstock.com did exactly that -- they dumped their NY affiliates and are refusing to collect NY tax. I was surprised that Amazon didn't do it, in that all their prominent NY affiliates (J&R, etc., etc.) would start screaming at the legislature to repeal the law.

My source: NY Times Bits Blog article

 

[Michael Reuben]

Thanks for that link, Ted. It'll be interesting to see what, if any, response comes from NY.

I suspect that the problem, from Amazon's point of view, is that they know they're in the crosshairs, no matter what they do. As they say in the complaint, there are plenty of reports of NYS officials referring to this as "the Amazon tax". Maybe they figured the fight was inevitable; so they might as well have it now.

M.

 

[Cees Alons]

I cannot comment on this NY situation with any authority or knowledge, but in the rest of the world, sales tax (if they want to make a difference and have the means) is based on where the buyer lives.

E.g. a US citizen buying stuff on his/her visit in Europe where 'everyone' pays VAT (Value Added Tax, a complicated system), can get it "tax-free" (through a system devised to exclude misuse). Also, if you order on-line from Europe, usually the vendor will not add VAT.

On the other hand, when I buy stuff outside of Europe, VAT will be added by the customs department (and I will have to pay it at the door when the package is delivered). If I buy from a vendor inside Europe (the Union), VAT will be collected by the vendor immediately (as they are required to do).


Cees

 

[Mark Zimmer]

In the United States, sales tax is charged based on where the seller is located. If they are in different states, ordinarily the seller does not have to collect the sales tax, but the buyer may be liable for use tax in his home state.

The New York law is unusual in that there is collection of sales tax based on the buyer being a New York resident, even though Amazon is not (I think they have resident status in Washington, North Dakota and one other state that escapes me). But Amazon has as I understand it agreed to collect in the future because the NY law has an amnesty provision for back taxes.

It should be noted that even though they're making noises against the NY law and apparently intend to challenge it, Amazon is a strong supporter of the Streamlined Sales Tax proposal, which would bring numerous states into line on what's taxable and what's not, and make it possible to collect sales tax on a more national basis. I suspect they support it largely because there are attractive incentives to online retailers to do so; they get a cut of the tax collections.

 

[Michael Reuben]

If that were so, then Amazon would be "charging" Washington sales tax on every sale. Obviously that's not the case.

The formula has two parts: The tax is charged based upon the buyer's location (or residence, in the case of use tax); it is collected based upon the seller's location. If the seller has no presence in the taxing jurisdiction, it's not obliged to collect sales tax on behalf of that jurisdiction, and the obligation falls upon the purchaser to report and pay use tax.

Hardly anyone bothers to pay the use tax on out-of-state purchases, which is why states are desperate to find ways to make mail-order and online vendors collect it as sales tax at the time of purchase. The current fight is over whether NY's revised definition of "presence" is constitutionally sufficient to impose that obligation on Amazon.

M.

 

[ManW_TheUncool]

Seems like if states seriously want/need to collect sales tax on out-of-state purchases, they need to overhaul the overall system, not just try to create new patchwork type laws that would probably just either open up new loopholes *or* be too draconian to be acceptable (or *both*!).

_Man_

 

[Richard Gallagher]

To appreciate the complexities involved, take a look at the myriad of approaches to sales tax taken by the 45 states which have sales taxes. In addition to state sales taxes, there are county sales taxes and city sales taxes. Some jurisidictions tax grocery sales, some do not. Some jurisdictions tax clothing sales, some do not. On mail order sales, some states tax shipping and handling charges, some do not.

Sales taxes in the United States - Wikipedia, the free encyclopedia

Connecticut charges no sales tax on clothing items which cost $50 or less, but items which cost more are subject to sales tax. New York State charges sales tax on clothing, but New York City does not. Some New York counties have clothing sales tax "holidays" once a year.

A streamlined, uniform approach to sales tax would not only require the assent of the states, but also a multitude of county and local jurisdictions.

 

[Mark Zimmer]

And in all likelihood the consent of Congress.

One thing that helps on the local level is that county and local jurisdictions in many states (if not all) are subject to the state legislature's dictates and can be forced into line if need be, though that carries with it its own set of issues.

 

[Dennis Nicholls]

Taxation at the federal level has its own problem, the Constitution. The Constitution permits a head-count federal tax. Art. I sec. 8 para 1 states in pertinent part "The Congress shall have Power To lay and collect Taxes, Duties, Imposts, and Excises.....but all Duties, Imposts and Excises shall be uniform throughout the United States..." Note "taxes" are not included in the second phrase. Later on in Art. I sec. 9 para. 4, it goes on to state "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken." Finally, Art. I sec. 9 para. states "No Tax of Duty shall be laid on Articles exported from any State."

Around 1850 Congress tried to impose an income tax, but the Supremes torpedoed it. Hence in 1913 the 16th Amendment was enacted giving Congress specific authority collect income taxes.

The sum of all this means that any "federal sales tax" would likely be unconstitutional. The typical remedy would be through a cabal of law professors in smoke-filled rooms, know as the commission on uniform state laws, who could write a uniform state sales tax law. Copies would be sent to the various state legislatures who would then rubber-stamp their approval. This is how the Uniform Commercial Code got enacted. Ask Mike Reuben for more on this concept.

 

[Michael Reuben]

Oh no you don't, counsellor! You opened the door; you field the questions. The UCC and I have never been on good terms.

M.

 

[Phil A]

The States' have so many varying statutes and some have localities that tax too, it is probably nearly impossible that there will ever be uniform statutes. Taxing jurisdictions rely on their taxes to pay for the services they provide. In jurisdictions that may not impose a sales tax, it may have a higher personal income tax. Some states have personal property taxes and their sales tax rate may be lower. Localities that have their own taxes (e.g. Colorado, Arizona) pay for some things in their budgets from the tax collections that other jurisdictions have provided by the State somewhere else. They've tried many times to reach agreements going back 40 years. the latest they have is the - Streamlined Sales Tax Project

It's goal is to promote uniformity and make it easier to do business in the State. States' that participate fill out a table of taxable and non-taxable items and a contact in the State so that a business has a little easier time than searching through voluminous statutes. It probably helps the small to moderate sized businesses more that may not have an in-house tax staff and subscriptions to tax services which can be a costly investment.

 

[ManW_TheUncool]

Hehheh. Then would it not be easier if states just basically collect it as a custom duty w/ the help of the few different shipping carriers, including the USPS? That's what's generally done for similar purpose when merchandise is imported to any particular country that wants to collect such, no? Basically, the states (of the USA) are more like individual countries in many regards, including this one, so seems like that would probably be the most practicable way to address this problem, no?

Of course, it's not a fail-proof approach, but I'm guessing most states would just be happy to collect those taxes for a majority of interstate sales done online, especially as the online businesses continue to grow greatly...

_Man_