Tucked into a Times report about a typically out-of-touch New York State budget crafted by the wizards of Albany comes this news:
Another $50 million [of state revenue] will come from requiring online retailers like Amazon that do not have a physical presence in New York to collect sales taxes on purchases made by New Yorkers and remit them to the state.
Is this the beginning of the end for tax-free Internet shopping?
There have been a lot of arguments over the years about why online merchants should not collect sales tax, many of them not very compelling.
Imagine how hard it is to be a brick-and-mortar shoe store, for instance, when your online competitors not only don’t have the brick-and-mortar costs to contend with but also don’t have to collect sales tax from customers.
The online sales tax debate has been heating up for some time now. Does New York’s move perhaps mark a tipping point?
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But amazon isn’t doing anything more efficiently, they are simply taking advantage of a government distortion in tax policy. The free market is when both companies operate under the same rules and you let the winners win and the losers lose. Amazon and brick and mortar aren’t operating under the same rules, which is unfair.
Look, I am definitely a small government/anti-tax type, but I am also for applying rules fairly and avoiding government distortions of the market.
david g(7) – Holding Amazon to the same taxation requirements that apply to B&M stores is not protectionist. Giving them an exemption that a store with a local presence doesn’t have (even if they also have an online shop) offers online-only retailers an unfair advantage. It’s a subsidy that may have been justified in the early days of the internet, but not anymore.
Amazon is certainly able to undercut its competition simply by not needing a physical presence and that’s great. But they don’t need a tax exemption on top of that.
Shouldn’t the tax at least reward the state that nurtures companies that make money, rather than the state that nurtures shoppers? i.e. If I buy anything from CA, and I live in New York, would it make more sense to pay CA tax?
What if the online retailer is from another country? I buy records or shop on eBay, and very often the seller is from United Kingdom or from China. Is the US state going to tax that seller in China?
That is the ultimate legal problem of the Internet. Once you put something up online, you might have offended some laws in Germany. Internet does not have boundaries, while nations still do.
With sales taxes, the argument is generally that the tax is levied on the buyer, and that the seller acts as the agent of the state in collecting the tax. In Indiana (as in most, or all states), sellers keep a portion of the sales tax collected (I forget at the moment what it is, and I’m not going to look it up) as compensation for their costs. It may be that calculation of taxes due is greater for internet-based sellers (but Lands’ End seems to manage), and so might require slighly larger compensation for the costs involved.
The major confusion here is between the actual incidence of the tax (mostly on the buyer?) and the collector of the tax (the seller).
One reason that Congress may be slow in acting is that in some states sales taxes can be deducted (if, e.g., there is no state income tax, or if sales tax payments are larger than income tax payments) from federally-taxable income. So there might be a (small) effect of federal income tax collections.
Clearly the State of New York has a connection with a buyer of sporting goods who lives in New York.
I disagree, a free market isn’t about operating under the same rules, its about operating under no rules except for utility/profit maximization. If Amazon is capable of taking advantage of a “distortion in tax policy” thats them maximizing their profit and possibly a market failure. But I still feel that many online stored offer a lower price and wider selection than the brick-and-mortars have been able to offer. Not always, but often enough that I will often turn to the internet for my purchases.
But NC has tried to do the use tax also, you’re asked to claim how much you purchased online when you file your taxes. I’ve never done this as it is interstate taxing and the only authority I recognize in that region is Congress, as I thought the Constitution clearly read. If that is true then I agree the only way to “fix” this is to have the Federal gov’t step in and levy a tax on all online purchases.
How is this enforceable? How do you define where the sale physically takes place? If the sale takes place at the location where goods and services are physically exchanged, then it takes place at Amazon’s warehouse; once they receive the money they send out the product, and the tax should be collected by the jurisdiction within which the warehouse is located. Meaning Amazon should move to the state with lowest tax (taking all their other costs into consideration of course).
But if the sale is where the consumer makes the decision to buy, then it the jurisdiction is wherever the consumer is located when he’s logged onto the Amazon website and placing the order. This isn’t necessarily where he lives or wants the purchase shipped to. The true location of the consumer is easily concealed and difficult to determine.
If I’m staying in New York for a month, and during that time I buy something from Amazon, why should New York collect the tax? What service provided by the state am I using when I place that order? My telecommunication is already taxed (paid with my phone bill) and the transportation is covered (paid with my gasoline). The jurisdiction that deserves to collect it would be where company is physically located. This need not even be in the US.
I haven’t read the court decisions on this, so these questions may have been answered already. Remember that though online purchases don’t have to pay for brick and mortar they have much higher shipping costs to deal with. I shop online for convenience; I’ve never found it much cheaper.
New York’s proposed tax is foolish and unenforceable.
Are you “more efficient” if a person goes to your “brick-and-mortar” competitor to see what fits best and which color they like best and then buys from you because he doesn’t have to pay sales tax?
It’s important not to use the word “exempt” with regard to Amazon and taxes. Amazon does not have an “exemption” from paying New York tax, because that would imply that New York state actually has the right to tax Amazon and is simply deciding not to exercise that right.
That’s not true. A state has no right to tax an Internet retailer.
Why not? What has New York State ever done for Amazon? If a New York-based brick/mortar bookseller is charged sales tax, it’s because New York can argue that it did many things to create an environment in which that store could do business.
When I buy something from Amazon, New York didn’t contribute anything to Amazon’s ability to sell to me and deliver its goods. So it doesn’t deserve any of the profit.