Interestingly enough, this information came from an
Internet information newsletter, not a tax newsletter.
In brief:
NY State hit Amazon.com for sales taxes even though
Amazon does not have a physical location in the state.
Amazon is suing, claiming the New York law is unconstitutional
based on a 1992 U.S. Supreme Court ruling that claims states
are prohibited from requiring out of state retailers to collect
sales tax unless the company has a physical presence in the state.
Watch this closely. This will be a landmark decision.
If NY wins, then two things will happen:
1) California first, then all other states, will adopt
similar laws.
2) All companies that have affiliate programs will have to
register their business in each state where they have affiliates.
(An affiliate program pays commissions to folks with Internet
sites for sales generated by their links – like Amazon.com.)
3) The businesses will have to register for a sales tax
identification number – AND that means they will also have
to file income tax returns in that state to report the income
earned from sales there. It’s going to be really, really messy.
Another interesting note regarding NY State.
The WebPro article quotes Tom Bergin, a spokesman for the state
Department of Taxation and Finance. “The legislation provides for
a limited amnesty for online sellers who register as sales tax
vendors and start collecting taxes by June 1, 2008.”
“If the seller registers and starts collecting sales tax by
June 1, the seller will not be liable for tax not collected
for sales tax quarters prior to June 1. Conversely, if you
don’t register and it is later determined that you should
have, you could be subject to tax dept audit for quarters
prior to June 1.”
This is quite a threat.
Yet, there is nothing on the New York State Department of
Taxation and Finance website to alert anyone to this need.
It’s not on the home page.
https://www.tax.state.ny.us/
It’s not on their News (recent additions) page.
https://www.tax.state.ny.us/nyshome/recent_additions/default.htm
It’s not on their Businesses page
https://www.tax.state.ny.us/sbc/
Nor can I find mention on their Sales and Use Tax Page
https://www.tax.state.ny.us/nyshome/stidx.htm
Heck, they don’t even mention this on their Abuse and Compliance page
https://www.tax.state.ny.us/enforcement/otehomepage.htm
And searching for amnesty brings up very old pages.
Nothing about sales tax.
So, if NYS wants compliance before June 1st, just how is
the business public expected to comply?
What should you do if you run an Internet business?
Use your best judgment.
Note: California and Kansas won their sales tax case against Scholastic Book Clubs, Inc. because the courts decided that teachers who took orders in the classrooms were agents of the company:
Scholastic Book Clubs, Inc., v. State Bd. of Equalization, 207 Cal. App. 3d 734, 255 Cal. Rptr. 77 (1989)
In re Tax Appeal of Scholastic Book Clubs, Inc., 260 Kan. 528, 536, 920 P.2d 947 (1996).
Are affiliates, whose sites simply link to Amazon, or your business also considered agents? Or is this just advertising?
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- IRS News :: Tax News and Links to Forms, Publications, Tax Code and more
- WebProNews :: New York Goes Gangsta With Tax Law by Mike Sachoff
- New York State Tax Website :: Department of Taxation and Finance
- Kansas Supreme Court Opinions :: APPEAL OF FAMILY OF EAGLES, LTD
- New York State Assembly website :: S. 6807–C – New York expands definition of Nexus
- Vertex Inc explanation :: Referrer Madness – New York Creates Associations to Expand Nexus
