back to article Newegg plays chicken with New York 'Amazon Tax'

Defying New York lawmakers, "egg-cellent" electronics etailer Newegg.com has suddenly ceased collecting sales tax from the Empire State's online shoppers. Under Governor David Patterson's new $122bn budget, online retailers with New York-based affiliate marketers are considered to have a "physical presence" in the state, and …

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  1. Anonymous Coward
    Boffin

    Pitter Patter of Shoppers' Feet

    It would be interesting to see the normalized sales figures for different states plotted over time, and compared to NY.

    If there is little effect, the tax will stick-- Amazon doesn't really care either way provided there is no effect on the bottom line. If there is a substantial effect, the states will need to do what they have been loth to do for decades: get together and regularize the widely varying state sales tax rules so that the sales tax can legally be collected nationwide on "mail order" sales.

    Otherwise Amazon could very well pull an Overstock or just throw neweggs at NY to regain sales lost to other sellers, if Amazon can even regain the shoppers.

  2. kain preacher Silver badge

    Go new Egg

    I hope they win

  3. Anonymous Coward
    Paris Hilton

    another rip-off

    Bastards just can't spend our money quick enough they have to try to tax the sweat off our bollocks. Wish they would just choke and die.

    paris, cause even she's better at handling her money.

  4. kain preacher Silver badge

    wont happen

    the states will need to do what they have been loth to do for decades: get together and regularize the widely varying state sales tax rules.

    Um the UK will scrap the national ID cards plan first, issue a hand written apology to every one. Then they will implement a strict protocol for government employee /contractors on handling private data. One that will work. Lastly on both sides of the pond , both governments will over turn these ridiculous laws that were pass in the name of fighting terror .

  5. Herby Silver badge
    Thumb Up

    So, when NewEgg attempts to get sued...

    New York's attorney general will just hop on an airplane and head for Whitter California to serve the papers, where NewEgg will trash them, and say "Go Ahead, make my day". I wish the AG good luck attempting to enforce NewYork law in California!!

    Now if he wishes to sue the affiliates, that's his choice. Let them be liable for the sales tax (all of it!)!

  6. Brandon

    I LOVE NEWEGG!!!!!

    FIGHT THE MAN!!!!!! I will always shop newegg.

  7. Ed Gould
    Alert

    NY TAX

    I think I must be missing something in this discussion.

    Why on earth should *ANYONE* care about collecting sales tax (from NY or any other place)? The consumer is the one paying the tax NOT the company. The only difficulty might be is figuring out what the sales tax is. I am not pro tax so don't get me wrong. If every other state handles it with a mutual agreement with the sending state (seller) why should any retailer care?

    *IF* the retailers position is that they are not located in any state thats one issue but to say they are not doing business with NY people is ludicrous. *IF* the issue " real presence", take it to court and fight it out like everyone else, meanwhile collect the tax and do what every other company does pay it to the state treasurer.

  8. Mitch
    Paris Hilton

    This is a symptom of a bigger problem

    I had the misfortune of working for years on a software interface to allow a tax engine to interface with a given accounting system.

    Very few people understand how complex and difficult it can be to accurately calculate sales tax. There are multiple jurisdictions, inside/outside city, inside/outside county, point of sale, product taxability, etc. Throw in some tax holidays and ever-changing local tax codes for good measure.

    It's a mess. It's expensive to do it correctly.

    On the flipside, retailers like NewEgg are given an advantage over local NY retailers with a sales tax discount. Why should somebody buy locally when it's convenient to order the same product off the Internet discounted 5-10% because sales tax is not being charged.

    If states could establish a relatively uniform way of charging sales tax it is feasible that states might also cooperate with each on collections. Unfortunately, that would require some intelligent politicians with proper motivation... and that ain't gonna happen.

    If I were NewEgg, I would do exactly what they are doing. Keep your competitive advantage and don't EVER collect or pay unnecessary state sales taxes. Once you pay them, you will always be required to pay them.

  9. Simpson

    @herby

    "New York's attorney general will just hop on an airplane and head for Whitter California to serve the papers, where NewEgg will trash them"

    I think it will go more like: NY AG goes to NY judge. Tells judge that newegg has a presence in NY and is violating existing NY law. NY AG tells judge that he tried to serve newegg, but was unable to. Because newegg does not have a "registered agent" in NY, in violation of state law, for companies with a physical presence in NY.

    NY AG asks for (and gets) a default judgement + daily penalties. This will force newegg to try to overturn the default judgement, and become the plantiff. Then if ny loses, they just lose. But if newegg loses, the interest and court penalties would be piling up over the couse of the case.

  10. Nameless Faceless Computer User
    Stop

    Bullies

    Sales tax is levied only on purchases made within the state. New York is wrong. The state government began first by claiming New York'ers should pay sales tax for gasoline purchases made within New Jersey. Next, they added a line item on annual tax filing forms to include an estimate of purchases made by mail-order. Now, they are going after the larger mail-order companies selling to New York.

    While I do not have so much of a problem paying my taxes, New York shouldn't be allowed to break the law by simply extorting money from other state governments. This should go through the established law making process.

  11. John Werner
    Stop

    Side Effects, Interstate Commerce Tax

    At first I didn't care about this issue. Then I received an email from one of the major source of revenue for a non-commercial website I run (a real .info site, not a fake one designed to do retail business). The email stated that the new rules meant that they would have to collect tax on commissions since I reside in NY State, and since they were not set up to do that, they would stop doing banner ads for all sites that are registered to entities in NY State.

    The implication here is that since the domain is registered to a NY State address, the place of business for the website is NY State, even if the traffic comes from other locations and the site is not hosted in the state.

    BTW, I'm still not sure how any state can legally charge sales tax. The US Constitution provides that there shall be not tax on interstate commerce. If I buy something from a corporation that is not in the state and have it shipped into the state, isn't that interstate commerce? Therefore, shouldn't it be protected from taxes?

    (Here is an interesting article on the new NY State tax from Forbes: http://www.forbes.com/2008/05/13/amazonlaw-states-rights-oped-cx_scjw_0514amazonlaw.html)

    - John

  12. Anonymous Coward
    Anonymous Coward

    Facts

    Newegg does not have a physical presence in New York.

  13. Doug Lynn

    Beware Newegg, Monarch Computer went under due to not paying sales tax

    Hi, NY is wrong about this, the affliates should be paying state income tax through their Amazon affliations on their commissions, however Amazon is not set up to collect sales tax. They could with better programming but it would never fly with consumers. They will just void the order paying NY tax and buy directly from Amazon. Would you pay tax on an order when you are not in NY? NO! By the way resellers have to pay sales tax to any state their distributors are located in if the order is drop shipping to that state. The reseller is forced to bill his customer even when he is not located in the customer's state, or lose tax money. By the way Newegg may be great for consumers but their RMA service stinks, making everyone go back to manufacturers for RMA. I have heard numerous complaints from the RMA dept of manufactuers. Also they are selling at wholesale price in volume and putting all the small/local resellers out of the parts business. Soon your local reseller will be no more, look what happenedto Compusa. Its really ironic because Newegg is owned by ABS a big computer reseller...Pay your tax Newegg or risk the way of Monarch Computers.

  14. Irony Deficient

    Dear John Werner

    The US Constitution has no such provision. Please recall that Article I., Section 8. states that Congress has power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes" (one of numerous powers enumerated there). Perhaps you were thinking of Article I., Section 9., which reads "No Tax or Duty shall be laid on Articles exported from any State" (one of several limitations listed there)? Note that Article I., Section 9. contains only limitations on federal powers (in this case, a limit on the power of Congress to regulate interstate commerce); the limitations on state powers are found in Article I., Section 10. (For example, the power to grant titles of nobility is forbidden in both Section 9. and Section 10.; the former forbids the federal government from doing so, the latter forbids state governments from doing so.) Because state powers aren't limited in Section 9., and no corresponding article to limit the power of states to tax is found in Section 10. (although a limit on the power of states to lay duties on exports is found there), states are able to lay taxes within their respective jurisdictions (such as sales taxes or use taxes) on articles exported from any state.

    Ed Gould, one of the reasons why sellers might care is overhead: they would have to track and remit the collected sales taxes to the relevant state revenue departments on a regular basis, and they would have to keep track of modifications in sales tax legislation, both permanent and temporary changes, for the forty-some-odd states that have sales taxes. (As Mitch alluded to above, the goods and services that are subject to sales tax vary by jurisdiction, and a jurisdiction as small as a single town can have a distinct tax rate from its county, and the county can be distinct from the state, &c.).

    Simpson, that's the crux: is the New York presence of Newegg a physical presence? If not, then there is no need for them to have a registered agent there, and the scenario would be moot.

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