back to article Amazon sues New York over Amazon Tax

Amazon has sued New York over an ingenious new law that would force the mega online retailer to collect taxes it doesn't like collecting. Last week, New York Governor David Paterson rubber stamped a $122bn state budget that enshrines what everyone is calling The Amazon Tax. Paterson and his state legislature have decreed that …

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Been waiting for this

It's a long time coming. And it seems "fair". It's certainly "unfair" of etailers like Amazon to put their customers in the position of needing to remember all of their "tax free" purchases.

Of course, the interesting slippery-slope will be how "tax free" states decide to view this. In the abstract, if I buy something in NH that's taxable in my home state, I'm also supposed to declare it (unless I "consume" it there or give it away, etc.). By extension, some of these tax-free items in NH may be available in the home state through the "same" company (Home Despot and Lowest both come to mind). So this will be interesting.

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We say that New York has a right to its tax money.

yes to its tax money not other states. If I I'm in California and I refers some to drive across state lines to Nevada to buy some thing , should the store in to pay Ca sales tax because I referred them to that store ?? you are suppose to pay the tax to the sate you live in.

Look st this one the way the law is written If I live in California and I'm visiting New york, California is suppose to get the sales tax not New York. under New York's new law California would be denied its tax money.

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You're crazy!

>We say that New York has a right to its tax money.

And I say that you are crazy. The law is clear and NY has no right to anything. Amazon does not reside in NY nor does it hold any office/warehouse. By the same reasoning then NY should start taxing merchandise purchased by mail/net order in other countries. And then all the other 49 states should do so.

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In a way, they're right ...

Lets say Amazon has a server in San Francisco and the buyer is in Timbuktu.

The buyer logs on to Amazon, and for the next few minutes at least, Amazon has a temporary presence on a LCD in Timbuktu.

But its during that next few minutes that the contract between the buyer and the seller takes place. That's right, it takes place *IN* the buyer's PC. So the contract ought to be subject only to Timbuktu law.

Similarly, ALL online contracts really ought to be subject to the law of the customer, not the law of the supplier.

If the customer is in the UK, then the UK Sale of Goods Act should apply. The seller should therefore be absolutely responsible for loss or damage in transit, and prohibited from charging for insurance, just like UK suppliers. And the customer should pay UK vat at UK rates to the UK government and NO tax to the USA government.

Sounds fair enough to me.

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Doesn't matter what El Reg thinks...

Different states in the U.S. have different sales tax rates, set by each state's government. And there's variances like taxes on foodstuffs (one state taxes all food, another won't, another might tax only 'hot'/served food served in restaurants and not 'cold' food bought in supermarkets). Opening up the door to try to get big AND small businesses to know each state's tax laws and particulars in order to collect the correct rate on applicable items is never going to work.

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Right to Tax Money

New York already has laws to gather taxes from items sold online - it's called consumer purchase reporting and it means that the customer must inform the govt of their purchases from catalogs/online. It's obscene that New York is creating new laws when they already have laws for this very purpose. It's a big problem of government to just keep creating laws (and loopholes).

This'll also put many online auction sellers out of business as individual ad's show up through search engines. They can't afford to stay legal with this kind of thing especially when some states follow suit and others don't.

And besides, no one has a right to another's money. They may have the ability to take it, but it's not theirs by right.

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Gates Horns

More to come.

I believe all the large states are going to pass laws like this. I can;t wait 'till the tax happy European coutries get wind of this.

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Governments have no "rights" to taxes.

You must enjoy paying VATs.

Kevin

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Unhappy

We're supposed to report those purchases?

News to me - funny how easy some accidental tax fraud is.

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Typical

Re: More to come (Timothy Economou)

Welcome to the real world!

If you reside in the EU, then you are already charged the appropriate VAT (the equivalent of sales tax) for the country in which you live. Any company with an international presence has had mechanisms to collect this tax for several years, so extending he principle to individual states within the US is not a big deal. Is this unfair? absolutely not. Stop whinging and pay your taxes to keep the fabric of society intact.

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Who cares what El Reg thinks?

"We say that New York has a right to its tax money. "

I say that you are wrong,

that it's not New York's tax money,

and that the attempted grab is indeed unconstitutional.

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fair?...not quite

How can this target one company?..if they want to tax everything on the internet fine but one company is a joke.

And if they want to tax everything on the internet they can go to hell.

... income tax/sales tax/property tax/Road tax/License plates/various taxes tacked on to every utility/insane taxes tacked on to smokes&booze/Gas tax/social security/medicare/Capital gains tax/inheritance/Death Tax.....

I would love to figure out what the actual tax rate is for americans.

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Paris Hilton

NY has it's right, but they need to follow the law!

The law says that New York consumers are supposed to report their mail order purchases on their taxes every year. I agree, NY should have their tax money, they need to start prosecuting businesses and individuals who fail to properly report their taxes. Don't push the job off onto Amazon, and don't use this BS about "affiliates" somehow equating a physical presence. I can't go to an affiliate's house or business and buy something from them just like I can in an B&M.

Even Paris knows just how dumb this is.

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Stop

press shouldn't give this

"We say that New York has a right to its tax money. "

>> But I don't think so.

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Happy

Amazon resides in your pc?

Pardon me, but that concept is absurd. You just have some html + images that someone sent you. Amazon is not in your pc. I can also assure you that if someone takes a photo of you, neither you or your soul will reside in that photo.

What they are trying to do is to legislate companies that reside in other states.. and for me, it is clear that it is illegal. As they know it, they should be tried and sent to prison.

And if you ask me about the fraudsters (people who don't like taxes..), they shoul also pay jail time.

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Taxation vs. Collecting Taxes

New York is certainly entitled to tax its citizens. It is NOT entitled to distort the current law in an attempt to force Amazon or any other company domiciled in another state to collect taxes on its behalf. I own a small company and I can tell you that it is a great deal of work keeping track of all the taxes in various jurisdictions just in this state. Small companies would find this an enormous burden and would likely refuse sales to some states where they only sell a few items a year rather than keep records for that state. Believe me, collecting the taxes is the smallest part of this; the cost of compliance is going to be enormous.

And then will eBay have to collect taxes on behalf of all of its sellers? Or will each seller be subject to learning the laws of each jurisdiction and keeping records, filing forms, etc.?

Somebody hasn't thought this through. Clearly this one is going to wind up at the U.S. Supreme Court and, win or lose, cost us all money.

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@By Doug Edwards

Read the comments again.

were not mad at paying taxes, we are mad at the fact that NY is trying to collect other states tax money and breaking the law

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sales tax stupidity

Sales tax only worked 150 years ago when everything was bought locally, no one ever traveled over 20 miles from where they lived, and it didn't work well even then.

Sales tax nowadays is a joke and a game between the tax collector who constantly dreams up new reasons to pay tax (and new things to pay tax on), and the public, who responds by finding reasons not to have to pay, or simply structuring their affairs so the transaction isn't taxable.

Example: About 20 years ago I formed a Florida corporation to own an airplane that was going to be operated overseas. The airplane never arrived in Florida (it was bought out of state and damaged on the way here), and the company closed, never having taken possession of the aircraft. Undaunted, the state of Florida sent a bill for $1,100 for taxes and tire/battery disposal fees for ESTIMATED tax incurred while the airplane was operated in Florida . . . and they had no idea when or for how long that might have been. It was a simple fishing expedition, and they were hoping someone would be dumb enough to send them a check. We didn't.

Example: Some ten years ago, I got a bill from the New York state sales tax people who decided that I owed them $400 in tax from my business activities in the state of NY. Except I didn't HAVE any business activities in the state of NY - no location, no presence, no customers. I told them so and told them to stop bothering me - again, they too were fishing, hoping someone would be dumb enough to send them a check. I didn't.

Example: I bought a steel building (out of state) and had it built in an "enterprise zone" in Florida. Enterprise zones are are economically depressed areas, and to encourage investment, building materials used there are specifically tax exempted. State of Florida is WATCHING THE ROADS for freight which might be taxable, tracked this shipment to me and sent me a bill for over $3,000 for "unpaid sales tax on building materials used in Florida". Their howls of anguish were wonderful to hear when I showed them the site was in an enterprise zone and they were not, by their own laws, entitled to any of MY money. Yet another fishing expedition.

The ONLY way sales tax can ever work in the US is for there to be ONE RATE nationally, collected by the seller, and under consistent, rational rules. That way no one would have any reason to chose the location of their vendor by sales tax regime (as we often do now, with sales tax rates running from zero to over 10%, depending on location, and with local sales taxes often on top of that).

Guess what - it ain't *never* gonna happen. NO state or local taxing authority is going to give up their current, jealously guarded practice and prerogative of juggling their tax rates and rules when they want to, and as a result, the 44,000+ sales tax jurisdictions in the US are going to remain totally Balkanized forever. People will continue to play cat and mouse with the state and local departments of revenue, and the states will continue to complain about "lost" revenues (which they were never entitled to in the first place). In chaos there is weakness, and I vote to keep the present chaotic system, which will enable me to hang on to as much of my money as I can. If the tax money is going to be wasted, *I* will do it myself instead of letting the fiscally incompetent states do it for me.

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Locate foot, aim, fire

So New York is saying that if a company based in New York (an affiliate) advertises or promotes the products of another company not in New York, then sales tax becomes due as if the product company was in New York. Won't that kill the advertising industry in New York overnight?

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Taxation Stupidities

I'm not familiar with the VAT systems in other European countries, but in the UK you don't have to do any tax paperwork unless your business turnover exceeds a certain minimum.

I have cousins in California. They have to collect State Sales Tax if they have a yard sale.

Is is any wonder that the USA is full of people who try to claim all taxation is unconstitutional.

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Flame

BUt NY has the right to this money already

It's no good saying that NY doesn't have a right to the money - it clearly does, under the existing legislation, as the article explains.

What they are attempting to do is make collection more efficient, because (surprise, surprise!), NY residents are either too ignorant, too lazy or too greedy to properly declare the sales tax that is ALREADY OWED.

Now, if you want to argue that the original legislation is flawed, go right ahead, but NY residents have obviously been living with it for years.

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New York is entitled to collect taxes, but not this way

US law is very specific in prohibiting taxation on interstate transactions. This law was put in place because some states and localities were putting tax collectors on their highways to "collect taxes" at the point of a gun. Yes, state sponsored highwaymen.

US law is also very well decided that a transaction taking place in one state cannot be collected in a different state, and that any remote transaction, i.e. mail order, telephone, internet, takes place where the vendor resides, because that is where the money is collected.

The law is also well decided that a transaction can only be taxed by the authority at the final destination of that physical product, where it will be used. The citizens of New York, and all of the other states, have individually decided that they don't want to pay the taxes the state calls "due". It would be inconvenient, and a real money loser, for the state to have to track down these people and tell them they need to pay their sales tax. It would also be seen as quite draconian for the state to start suing any real number of it's citizens to collect $5.32 for that mp3 player or book.

A national sales tax that replaces the local state, county, city taxes to any degree is also forbidden by the US constitution. No local politician would vote to ratify that kind of amendment - taking away their power to tax.

The simple fact is that bureaucrats always want more money from the people, and people don't want to give more money to the government. Government is always trying to find new ways to force people to pay up, and people are always trying to come up with ways to avoid that.

It's a cat-and-mouse game that will continue, absent an Orwellian dictatorship.

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Go

Tangible Assets

Amazon do actually deliver the books to the purchaser so must have the address. What's so difficult with simply adding the sales tax at the point of sale, thousands of other website manage to do it. Buying from German, Italian and French web sites and getting the UK's 17.5% VAT on top is perfectly normal for me.

Sounds like Amazon are simply worried about losing sales as their prices look less attractive when they are forced to complete on a even field.

J

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@kain preacher

I'm mad at paying taxes. I think they are a silly thing and do little beyond support the weakest links in civilization and pad the pockets of people who already live in ivory towers.

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Paris Hilton

Oh No

Oh no the dead evil ghost of Ronald Reagan's "Proposition 13" of long ago from old California still haunts the land !

Some wacko yankers will they ever learn , some bad ideas which look good on paper will never work in the long term , and their future cost in the long term will always exceed the paper savings claimed on the day !

Some people always seem to have a few more brain cells then others who claim to be leaders !

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Ros

This is retarded

Affiliate marketing is simply advertising. Affiliates aren't part of Amazon, they don't act as employees. I don't think it's relevant that Amazon uses a CPA model instead of CPC for paying affiliates.

By the same argument you could claim that any ecommerce website that advertises online is located wherever their advertising providers live. Insane.

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Unhappy

@Zelos

The problem is that the sales tax system is way more complicated in US than it is in Europe. In Europe, there is only one sales tax system for each country, which means less than 20 different tax systems.

In US, not only does each state have a different sales tax, there are also regional peculiarities. I remember buying a Tomato juice in Gran Canyon, and finding on my bill a federal tax, state tax, and ENERGY tax. "To pay for the energy necessary to bring the tomato juice to Gran Canyon", the waitress said.

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Anonymous Coward

a REALLY bad idea

As a small business owner, this would drive me out of business. This isn't about whether taxes should be paid or not (at least to me), it's about the most efficient way to tax and collect.

Technically, it's certainly easy to tax at the point of sale based on the buyers state. The problem is in dealing with the legal and accounting issues associated with having to deal with tax codes from 50 states. Not to mention all of the paperwork and payments we'll have submit to each state.

I think someone else's point about sales tax being a relic of the past is correct. In order to facilitate more efficient commerce and business in general it's time for an overhaul regarding taxes. Again, I fully accept the fact that taxes are mandatory but there is so much waste generated by the current tax process and trying to impose this law is only going to make it much worse.

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Boffin

NY DOES have a right to their taxes...

and it's NOT Amazon's responsibility to collect them. Like Maine's, where I live, New York's sales tax is actually a sales and use tax. That means that if you live in NY, and don't pay sales tax on something you buy, you need to pay use tax when you pay your income tax. (See http://www.tax.state.ny.us/pit/income_tax/sales_and_use_tax_on_my_income_tax_return.htm)

Re: In a way, they're right ...

Actually, the contract does NOT take place in the PC. A contract only takes place when both parties agree to it, and Amazon doesn't agree to sell you anything until they check your credit card and get their money. So the contract is finalized on Amazon's server.

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Tea Party, Anyone?

Wasn't the US founded by a bunch of people who didn't want to pay taxes? Can't say I blame them, I'd probably have been on their side as well.

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Stop

@Doug Edwards

"Stop whinging and pay your taxes to keep the fabric of society intact"

I calculate that I finished paying THOSE taxes in about March. The taxes in the remainder of the year are for pork projects, unnecessary wars and the lining of politicians (and their friends) pockets.

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@Luca

<<

By Luca

Posted Friday 2nd May 2008 19:25 GMT

>We say that New York has a right to its tax money.

And I say that you are crazy. The law is clear and NY has no right to anything. Amazon does not reside in NY nor does it hold any office/warehouse. By the same reasoning then NY should start taxing merchandise purchased by mail/net order in other countries. And then all the other 49 states should do so.

>>

Whoh, there are good points of both sides of the debate, but that one was realy the most stupid thing that could be said.

It's laughable.

You're saying NY has no right because theprevious law did not allow it? Is that right? The law NY is precisely entitled to create/change because that's what states do?

It's really, really funny reading someone who basically says "it is unlawful for lawmakers to create that law because it does not already exist".

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@Ratfox

>>The problem is that the sales tax system is way more complicated in US than it is in Europe. In Europe, there is only one sales tax system for each country, which means less than 20 different tax systems.

Actually, I'll gladly alleviate your ignorance by informing you that 27 (the number of member states of the EU) is not "less than 20".

Of course, it doesn't make the rest of your point any less valid, that was just for your information.

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over complicate things...

why do yanks always insist on looking at what the rest of the world is doing, then doing it completely differently in a much worse way? (i'm not thinking of any specific standards where they have gone for the worst standard apparently just because the rest of the world went for the other one... because there are too many examples of that to start getting specific!)

here it's quite simple, you get paid your wages, your pay slip on it has how much was taken out and sent to the tax man - a simple calculation the company makes, and if there is a mistake and you over pay (normally due to a job change during a tax year) then the tax man automatically informs them/your a new employer how much to refund you (and they deduct that amount from the payment they send to the tax man)

then you take your wages and you go to the shop and you pay the price listed on the product, and if that shop is vat registered (only compulsory for a turnover of i think it's around £60,000 or above) then they take part of that final sale price and send it to the vat man, but you have no need to concern yourself with this unless you run a company with that much turnover (in which case it's mostly a simple 17.5% of final sales price, unless you're dealing in excluded/discounted categories)

and for international sales the companies just handle the vat in the same way as normal, they charge their local vat which is then passed on to their vat man as usual, just with a note of how much should be forwarded to the relevant governments - however i'm not sure if this is actually down to this being how it's meant to be done or just that nobody actually has a clue including the various vat men (seems to be the indication i get) so they just went with collecting vat the normal way and that has become standard practise (some companies do charge your local vat after getting your address, however they tend to be international companies with offices in the countries they sell to so could be treating them as sales from that office in your country just to be on the safe side)

compare that with the US, where the last time i went there (in 2001) i tried to buy something from the macdonalds "99cents menu" only to be told that the $1 i went to pay with wasn't enough!

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Happy

taxes

"We say that New York has a right to its tax money. "

Ah, right to tax money, interesting. What about the "no taxation without representation" rule? If NY charges out of state sellers and individuals tax, then surely those selfsame individuals should be entitled to a vote in the New York elections? Or is that assuming that taxes are levied on citizens as way of providing services for those selfsame citizens, up to and including a vote on how and by whom those services are provided?

There does seem to be this peculiar ideas that governments (UK, US and US state governments) can just tax people 'because they can' without accountability or providing services for the money they extort (sorry, levy).

Gordon Brown, please take note

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RE: Amazon sues

>> I'm mad at paying taxes. I think they are a silly thing and do little beyond support

>> the weakest links in civilization and pad the pockets of people who already live

>> in ivory towers.

Well so long as your happy then. Deary me, where has all the compassion gone, I won't event get into the idea of not having any social systems and programs and go strait for "you heartless bastard"

As for NY, an unthinking solution to a messy problem. I bet they thought it was clever but the only real solution is a rethink of that part of the tax system city to federal.

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Miami Mike..

As a fellow resident of FL, you're my new hero!

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3rd party?

I'm not an expert on taxes or law in general. It just seems odd that the actions of a 3rd party company can affect another when there is no direct agreement between them. My example isn't a good analogy but hopefully you see where I am going with this: If a advertiser advertised something illegally and directed you to Amazon's site then Amazon would be on the hook for any applicable law resulting from those actions as they have the same third part relationship. Seems like the ad world would not like this new law...

I think NY and every state should be entitled to tax from online retailers. But first they must make their currently budget, state contracts, etc. transparent because if they were forced into not wasting money they would certainly recoup more money and people like myself wouldn't be so bitter to give up the online tax $ if we knew it wasn't going to the wrong place. It's always easier to raise taxes then to cut the BS which is the real fix.

I think Americans aren't opposed to taxes, just apposed to seeing our tax money go to politicians instead of the services they were meant for.

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Not a right...

"We say that New York has a right to its tax money. "

Government has no rights...only the citizenry has rights. Government has powers. It makes a difference. We don't ever want government to have "rights" because it is nigh difficult to take away (and questionably unethical and immoral) someone's rights (unless you are black or gay) but "powers" can be removed.

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NY Amazon tax is not legal

Hi, I went through this with my online store with the State of California. I don't have a presence in CA, but I do sell to them. They asked me to pay the tax anyway to any of my customers in CA but admitted they have no legal authority to collect it, it would be voluntary... How many people pay voluntary taxes??? I am an affiliate of many companies all over the world. I don't sell anything, I advertise for these companies and get paid a commission if someone clicks a link on my website going to a their website. I have no idea if a sale took place, only the company I advertise would know this. This commission I get paid is part of my income and tax is paid on my state and federal income tax. Their is no way a small online company could keep track of 50 states taxes, and the only way it could work if the federal govt stepped in and collected a federal sales tax and distributed it to each state. I stand with the Supreme Court ruling on this debate. Tax authorities only have power to collect tax in their own states by law.

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@mike

"why do yanks always insist on looking at what the rest of the world is doing, then doing it completely differently in a much worse way? (i'm not thinking of any specific standards where they have gone for the worst standard apparently just because the rest of the world went for the other one... because there are too many examples of that to start getting specific!)"

I do belive sales tax has been around longer than VAT.

The VAT was invented by a French economist in 1954.

Us Sales taxes started as we know it in 1930's 34 out 50 states had sales tax before VAT

http://www.bus.utk.edu/cber/staff/mnmecon338/foxipt.pdf

Nice try though.

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This could become a nightmare

As Dale said, each state has different taxes.

If NY get this then why not wyoming or nevada. Each state wanting their share of the pie.

That means that Amazon and others would have to note where you live, not the tax rate and then add extra accordingly to each order.

@third party, I think everyone thinks the same, stopping wasted money by public officials is more important.

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@Martin Owens

If you think that the only way to pay for social programs is by extorting money from people at implied gunpoint, you either have a view of humanity so depressing I wonder how you get up in the morning, or a crippling lack of imagination.

Paternalism only works as a self-fulfilling prophecy. Treat people like children and they'll remain children.

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Anonymous Coward

RE: In a way, they're right ...

Err.... no, the contract does not take place in the users PC, the contract takes place, with all processing etc. done in the servers of the website, all the users PC does is display the information it is given. By your reasoning, you could say that the contract takes places in a users telephone when they order something using it.

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ian

if NY citizens should be reporting this in their tax return

why doesn't NY just ask Amazon for details of all transactions sent to NY, and bill their residents accordingly?

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No to amazon tax.

The issue is not if New York is due the tax. It is an issue of a state forcing a private business in another state into collecting it's taxes for them. It is also a matter of the impact on ecommerce.

I am putting up a site now with more information. Until the domain works go here for the views. http://www.reelectnoone.com/amazon_tax.php

Bottom line, in the US there are 50 states with over 7,500 different taxing jurisdictions. If NY is allowed to succeed it will wipe out almost all small ecommerce business because none but the very wealthy companies can afford the resources to manage such a complex task of trying to comply with every one of these tax codes.

As a web developer it could put me out of business too. I would be hard pressed to find any small companies and no home based operations able to comply with 50 different state laws.

What would be next? I have ordered from sites in the UK. Will you have to collect and pay sales taxes and file forms in 50 different states if you continue to sell in the US?

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Stop

No way...

I live in New York, My salary is paid by New York State tax dollars, I pay tax ontop of all that. So as it is I am already paying part of my sallary. I do a good portion, if not most of my shopping on Amazon.com. I figure I can make up a little where I get charged out the arse every other way in this. I don't think New York should get a penny from Amazon.

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