back to article New York judge OKs Amazon Tax

A New York Supreme Court judge has approved the state's new-fangled Amazon Tax. Earlier this year, Amazon.com and Overstock.com sued New York over an ingenious new law that forces the big-name online retailers to collect sales tax if they maintain affiliate networks in the Empire State, and this afternoon, Judge Eileen …

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  1. Ian Michael Gumby Silver badge
    Unhappy

    Major blow to Amazon!

    Part of Amazon's business model is to utilize affiliate sites to help drive business to Amazon.

    Maybe they're big enough that they don't have to continue to do this, but this could mean that Amazon will probably phase out their affiliate program because of the risk it has to their revenue.

    Its definitely feasible for companies that do business on the internet to actually calculate and charge the appropriate state sales tax. There isn't really a large burden on the retailer since most of the systems are on a computer and are automatic.

    Looks like the tax man is coming to an e-tailer near you!

  2. Anonymous Coward
    Thumb Up

    Taxes set you free

    Give till it hurts!

  3. Dave

    Tea Party?

    Surely they ought to go dump a load of tea off the Brooklyn Bridge? Unless they can vote in the state, they shouldn't be required to pay taxes there, surely that's one of the founding principles of the US?

  4. jon
    Paris Hilton

    What next

    Anybody know how the folk over at Ebay feel about this ?

    Paris: because I'd like to know how she feels..

  5. Steve B

    Simple - stop selling to New York.

    Surely a concerted effort by the leading etailers, stopping all sales to anyone with a New York address will have a noticable effect on this policy.

  6. Anonymous Coward
    Anonymous Coward

    Re: Tea Party?

    Amazon aren't paying the tax, they're collecting it. The buyers who live in New York are paying it to Amazon as part of the price, but Amazon probably don't want to pass the taxes collected back on to the state.

  7. Mike Groombridge

    @simple

    Not really as every one would then be forced to shop from REAL shops and spend they money in state hence more money for the state government. see the problem here.

    now i sorry i fail to see the problem. surely this is just the equivilent of VAT in the UK . just set on the state instead of the national level. and i expect to pay VAT no matter were i buy online or not thems the rules.

    as my tax advisor friend says to me every few days the government will get it's slice of cake some how and generally it tries to get 3 or 4 slices.

  8. Simon B
    Thumb Up

    Steve B wrote my title word for word before I'd even thought it!

    Simple, stop selling to New York. Once no bugger sells owt to New York I'm sure the state will realise something!

  9. Paul Donnelly

    hey guy!

    ..... how about you give us some of that internet money! (Reprieve)

  10. C. Nelson
    Alert

    not quite.

    "Amazon aren't paying the tax, they're collecting it. The buyers who live in New York are paying it to Amazon as part of the price, but Amazon probably don't want to pass the taxes collected back on to the state."

    ... I can see someone failed reading comprehension classes. Amazon has not been collecting sales tax from New York residents because Amazon does not (did not) have a physical presence in New York state. They're fighting to keep from having to both collect and pay sales tax because it drives the prices up, which in turn lowers the appeal of shopping at Amazon for the New Yorkers who are choosing Amazon, in large part, to *avoid* the hefty sales tax they would pay if they went to a local retailer.

    New York state, knowing quite well that this is a large part of the reason New Yorkers shop at Amazon, and wanting to bring that revenue back home, is now arguing that affiliates count as physical presence, which would cause Amazon to have to charge sales tax and thus pay sales tax on New York sales. Either that, or not collect sales tax but still pay sales tax -- vanishingly unlikely -- or, drop its affiliates in the state, which is probably what they will now do, as Overstock has already done.

  11. Tom

    Calculating the sales taxes is not a simple matter

    We've got 50 states, each of them with different sales tax rates. Within each of those state each county, and possibly even cities or other smaller jurisdiction within those counties may or may not have additional/separate sales taxes. The rates differ depending on goods. When I lived in Pennsylvania with a 6% state sales tax, food and clothing were exempt from the sales tax. When I moved to the People's Republic of Maryland, the sales tax went down to 5%, but included clothing (the rate was recently boosted to 6%). Even within a broad range like food, different things get taxed differently. Where I am currently, milk is not taxed, but sodas are. Any of these 1000s of possible taxing jurisdictions can change any of their tax rates at any time. Some even have certain "tax holidays" on which they collect no sales tax. Here in the People's Republic, they do this for a week a couple of weeks before public school starts for "clothing and school supplies" whatever the hell that means. It is reasonable to expect a store owner in a fixed location to know the tax rates for his city/town, county, and state because that is only 3 levels of confusion.

    Anyway, we all expect the New York judges to engage in sufficient mental gymnastics to produce a decision exactly the opposite of the clear meaning of 1992 Case (and its earlier catalog sales precedent) . This case will only be decided once it gets out of the state system.

  12. Andy Barber
    Coat

    VAT

    If I buy from amazon.co.uk I pay VAT on the product. As amazon.co.uk have been around for a few years now, I haven't head of HMCR takeing amazon.co.uk to court for non payment of VAT, so assume amazon.co.uk pay the tax. Why can't amazon.com pay it's <local> tax then?

    Mine's the one with Friend of Madoff on the back.

  13. Anonymous Coward
    Unhappy

    yeah, right

    "Judge Bransten basically shot down all of the company's claims that New York state was picking on Amazon because it needed the dough."

    RIght, if we didn't need the dough we wouldn't have our hand in your pocket.

    @jon - she feels fine.

    @ac - Re: Tea Party? Posted Tuesday 13th January 2009 11:38 GMT

    No, really. They're just asking (demanding) that Amazon be their tax collector; just like they require local stores. First Amazon...then everyone else.

    @Mike Groombridge - Not really as every one would then be forced to shop from REAL shops and spend they money in state hence more money for the state government. see the problem here.

    This would be funny if any "REAL" store actually had the selection that's available from Amazon.

    Try naming one store...just one will do....

    @C. Nelson - New Yorkers who are choosing Amazon, in large part, to *avoid* the hefty sales tax they would pay if they went to a local retailer.

    I suspect that if the federal gubmint set the "internet sales tax" to the minimum state sales tax so that every company had a maximum of 50 tax rates to worry about this would be a lot easier. Unfortunately, with a bazillion tax rates all over the country for differing types of merchandise this would be a nightmare for any online corporation no matter how large and would instantly force a sizeable increase in prices. Amazon's big advantage is that they HAVE no storefront and can thus offer a much wider selection of merchandise for sale across all state borders.

    Anyway, all those local tax avoiders are supposed to be paying their "use taxes".

  14. Hugh McIntyre

    Re: Calculating the sales taxes is not a simple matter

    As far as the tax rates are concerned, there are apparently databases that on-line vendors can subscribe to that map from zip code -> tax rate. So this at least is solvable (including tax holidays if needed). Remember that the vendor needs to do this in-state anyway.

    I do agree with the concern over different things being taxable/non taxable though. As it happens there is an article in the local paper here today about some of these incompatibilities, for example one state classified T-shirts as clothing (not taxed) while another counted them as sporting goods (??) and therefore taxed. The mind boggles. The story is that a bunch of states are trying to get their rules made compatible, probably as a prelude to saying "therefore pay tax".

    Overall, while people are obviously happy to not pay tax, and there are complications, keeping an exemption for internet sales is difficult to fully justify long term. Especially right now when all of the states are short of money (in the case of California it's their own fault, but...) and the competed-against traditional stores are not exactly having a good time right now either.

  15. Anonymous Coward
    Anonymous Coward

    Re: Calculating the sales taxes is not a simple matter

    Local sales taxes are a bogus argument - if Amazon had a "physical presence" in NY, they would just pay the state rate and ignore township and county rates. There are very few municipalities that would reap more in taxes than it would cost in legal fees to fight such a case - the State's potential income would be vastly bigger, but it's legal costs would bot be much higher.

    The "no taxation without representation" argument is typical of the shallow thinking that leads Americans to ask legal immigrants if they don't have to pay taxes. (The answer is that the IRS doesn't give a damn about representation - if you're in the US, you're liable for taxes on your income, citizen or not). Amazon won't be taxed if this law is enforced, it will simply be collecting Sales taxes from New York residents, most of whom do have a vote in NY State.

    I don't like paying taxes any more than anyone else, but I know that getting my online purchases tax free from an internet retailer in the next state is a loophole, and that there is no basic principle of "tax fairness" that underpins this avoidance of Sales Tax. I don't know what the logic of the 92 Supreme Court case was, but there's no real technical "burden" on a retailer like Amazon in calculating these rates, it's just a question of losing their competitive advantage over NY based online retailers.

  16. Anonymous Coward
    Anonymous Coward

    RE: Paying tax / VAT

    When you buy from amazon.co.uk, Amazon do not pay the VAT to HMRC. *You* pay the VAT to Amazon who put it in the bank for the quarter and then pass it onto HMRC, less any VAT they have paid out for products / services they have acquired.

    So, in NY it would be that NYorkers would pay the sales tax to Amazon who would then pass it on to the state. The net effects would be:

    Customer's would pay more

    Amazon would make the same profit*

    NY State would make more profit

    If customer's have to pay sales tax then Amazon becomes less attractive than previously so there is a risk that customers would go elsewhere (like the shop where they can take possession of their goods immediately) or Amazon would have to lower prices and make less profits.

    *I know that Amazon would be able to make some interest on the collected sales tax, but I am assuming this would be offset against the costs of processing the extra tax.

  17. Anonymous Coward
    Stop

    Re: Tea Party?

    The principle of no taxation without representation has never been a tenet of US law. I live in NY without citizenship and cannot vote at any level (City, State or Federal) yet they tax the crap out of me. Anyway, Amazon isn't being taxed, it's customers are. All the state are trying to do is reduce tax avoidance since in-state people very rarely pay tax on stuff they have bought over the internet, despite being legally required to do so.

    To be honest though, online retailers should be required to deal with local tax codes. To not do so gives them an advantage against local retailers. I really don't care if all the tax codes in all the states are different - people have to deal with those problems in other parts of the world. In fact, given the lobbying power of the big internet retailers, I'm sure they could lobby for simpler tax codes which would be a good thing in general.

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