SmallBizResource Blog -- Retail

New York Opens Amazonian Pandora's Box

Posted by Gayle Kesten Wednesday, Apr 16, 2008, 12:22 PM ET

New Yorkers may soon be kissing their tax-free Amazon days goodbye.

From Computerworld: The New York State Legislature has passed a budget that includes a provision requiring certain online retailers, including Amazon.com Inc., to collect sales taxes from online purchases and remit them to the state...The law, which will go into effect as soon as Gov. David Paterson signs it, will require Internet companies with some kind of physical presence in the state to sign on as vendors by June 1 and collect state taxes.

The law sets to enforce the "use tax," which requires Americans in states with sales tax to track their out-of-state, tax-free Web purchases and make good when April 15 rolls around.

Asks Verenda Smith, government affairs associate for the Federation of Tax Administrators: "Do you want to be a good American, or do you want to be an American who wants to cheat your government deliberately? It's a harsh way to look at it, but it's true."

Ouchie. I'm not a cheater! I’m also not that worried about the brick-and-mortar stores she thinks have been put at a disadvantage by online retailers. Mom and pop stores, yes. But that's not what she said.

Even though Amazon itself doesn't have a physical presence in the Empire State, the fact that it operates via local affiliates -- which link to Amazon products and services and receive referral fees for resulting purchases -- lumps it in with those that do. The law will be the first of its kind in the entire country, reports The New York Post. And here in New York, it means an additional $50 million collected this year alone.

I hate parting with my hard-earned money just as much as the next person. For small businesses, the sting is even stingier. But is New York truly out of line? From The Register: Like Amazon, many customer advocate groups have badmouthed the plan. It would mean customers forking over more tax dollars. But as we've said before: A state has a right to its own taxes.

I realize there's more to what I'm still getting my arms around. This New York Times article, dating back two months, does a nice job highlighting more of the issues, including what some consider an antiquated e-commerce taxation system.

One thing I do know: What happens in New York won't stay in New York.

What do you make of this? I'd love to hear your thoughts.

Retail