Amazon, Newegg Begin Collecting Sales Tax From Residents Of New York

Despite filing a lawsuit to challenge a new law requiring websites that use affiliates based in NY (like Amazon) to collect sales tax from their NY customers, Amazon has registered with the state and is now collecting sales tax. Electronics retailer Newegg also began collecting tax from NY customers.

The NYT explains:

In April, as part of its 2008-2009 budget, the state legislature passed what is being called the “Amazon Tax.” What’s new isn’t actually a change in the law—New York residents always owed tax on their purchases—it is an expansion of the law that is meant to force online retailers to collect the tax and send it to New York. Any company with physical operations in the state—such a store or office—already collects tax for the state.

Indeed, the state calculates that of the nation’s top 20 online retailers, 18 had already been collecting tax because they, like Dell and Staples, had operations in the state. The remaining two—Amazon and Newegg.com—have now registered to collect taxes.

The state now says tax must be collected by any online store that gets customers referred to them by Web sites based in the state.

Amazon’s lawsuit is making its way through the courts, but a provision exempting them from retroactively owing tax on all prior purchases by NY customers if they signed up by June 1st forced the retailer to start collecting the tax. Overstock dropped all its NY affiliates and will not be collecting tax.

We suspect Overstock is going to get a lot more popular with New Yorkers pretty soon…

Let the Tax Collection Begin [NYT]
(Photo: Tom Simpson )

Comments

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  1. ARPRINCE says:

    I’m really glad I’m in NJ!

  2. Bladefist says:

    Vote for change. This is definitely change.

  3. rmz says:

    I still don’t think the NY legislature has really thought about how this will impact small online businesses that can’t afford to handle processing taxes separately for (potentially) each state in the union. Unless there’s some provision in there that I’m not aware of…

  4. speedwell (propagandist and secular snarkist) says:

    Despite the fantasies of bureaucrats in New York, consumers are not cash cows to be milked. I don’t live in New York, but if this happened in my state, I would drop Amazon like a hot rock, and I do upwards of a thousand dollars a year in business through them. And I wouldn’t start doing business with Newegg, even despite the fact that their prices are lower to begin with.

  5. skitzogreg says:

    Sucks to your ass-mar.

  6. HOP says:

    i avoid buying anything on line that i have to pay tax on…i pay enough tax to this state as it is….i’m also close to tax free delaware…..

  7. Tmoney02 says:

    @HOP: “i avoid buying anything on line that i have to pay tax on”

    As do I. I figure I have to pay tax if I buy instore or shipping If I buy it online. They usually are about the same amount. Luckily I don’t live in NY but if I did I would probably start buying less online. Brick and Mortar stores must be loving this law.

  8. chemmy says:

    So much for buying on Amazon… Maybe will now ship to my mom in CT instead….

  9. MayorBee says:

    “The state now says tax must be collected by any online store that gets customers referred to them by Web sites based in the state.”

    How easy will that one be to enforce?

  10. zibby says:

    I don’t mind. The New York State Legislature has proven so shrewd and efficient when it comes to spending that this can’t help but improve the lives of all New Yorkers.

    Oh well, nice knowing ya Amazon – but I can get my pocket picked anywhere.

  11. Ihaveasmartpuppy says:

    @MayorBee: No kidding!

    I have a VERY small online business. Lots of hobbyist sites have links to my business, and I’m sure one or two are in NY. PLEEEAASE. I am a one-person shop with way too much paperwork to keep track of already (thank you very much federal, state and local government agencies). There is no way I can collect, keep track of and report sales tax from each and every state. To hire someone to do this would make my already too small income not even worth the trouble. I would have to close.

  12. gqcarrick says:

    This is just sad, I ordered a TON of stuff from Newegg and Amazon. For me its not as easy to go to the Mall or some electronics store. Its 45 mins from my house in the country to any mall or big chain store. Now I have two options: 1. Get screwed and pay for the high price for gas and taxes by going to the store or 2. Get screwed and pay tax and shipping online. Gee thanks NY State :(

  13. phripley says:

    @MayorBee:

    My understanding of the law is that “Web sites based in the state” really means websites that are a part of the affiliate program. Shouldn’t be that hard to enforce. If you are a web store and have an affiliate program you are mailing checks to your affiliates. You are either mailing checks to affiliates in NY state or you aren’t.

    I was kind of hoping that Amazon would dump the NY affiliates as Overstock has done.

    I think the big winner in NY is J&R. They are psyched to have pricing parity with Amazon.

  14. chiieddy says:

    @HOP: Unless you live in a state that doesn’t have sales tax (i.e. NH), you still do have to pay it to your state. This law in NY is basically forcing the internet companies to collect it for you and is probably unconsitutional, actually. I pay my state income tax on sales purchases made out of state to MA on my annual income tax statement.

  15. temporaryscars says:

    God I hate living in this state. We’re taxed to death and what do we have to show for it? A garbage economy. That’s about it.

    Does the state have a legal leg to stand on here?

  16. MrEvil says:

    At least Texas isn’t making the outlandish and very dubious claims that NY is. Texas is going after Amazon, but that’s because Amazon has a fulfillment center in Irving with their name on it.

    The argument NY is making is baseless. Newegg doesn’t have a paid referral program. Any website in New York promoting them is merely free advertising.

  17. MayorBee says:

    @phripley: I guess that makes a lot more sense. I was taking it that stores referred (i.e. linked to) by websites based in NY would have to pay the NY state tax. Thanks for clearing that up.

  18. Mike8813 says:

    I’ve unfortunately been missing out on tax free Amazon spending for a while. I was in Washington state for the last year, where Amazon is based, so I was subject to sales tax. Now I’m in Kansas. They also charge sales tax to residents of Kansas… why, I’m not sure yet.

    As far as those of you in New York, a good alternative for electronics purchases could be Vanns.com. I wouldn’t think they’d be on the top 20 list of online retailers, and therefore might still be tax free for you guys. I’ve used them before. Great customer service, and very similiar pricing to Amazon. Good luck!

  19. nycaviation says:

    I think Amazon will win their suit, but I’d say it’s only a matter of time before Congress changes the law and there’s tax on all interstate internet purchases.

  20. battra92 says:

    I am so glad I don’t live in NY. I had planned on moving there about a year ago but honestly, this cuts out my two favorite retailers. Unless I was to have my parents order for me and pick it up (which based on the cost of gas would be cost prohibitive most likely)

    NY is one of the WORST run states in the country and the taxes are outrageous. My grandmother pays property taxes, school taxes, state income taxes, 8% sales tax etc. She’d be better off moving to MA but at 73 she doesn’t really want to just pick up and move.

  21. IphtashuFitz says:

    @MayorBee: My guess is that if the NY AG’s office decides to enforce this they’ll simply sign up a referral account on Amazon and clearly sign it up as being in NY. Then they’ll claim that Amazon now has a business presence within the state of NY so they can file a lawsuit against Amazon from within NY.

  22. tande says:

    Tragic seems a bit overdramatic.

    This is the way that all states are moving. Thats part of the reason for the SSTP to remove some of the “obsticles” pointed out by the court in Quill and allow all of the states to move in this direction.

    You’re obviously going to get better compliance by having companies doing the collecting of the tax then you’re going to get by having the consumer report it on their own.

    I think Amazon starting to collect the tax is going to hurt them when it comes time to go to court. Its going to show there isn’t any obstical to them collecting the tax in the first place. The only thing they’ll have then is that they don’t have nexus and I think that they’re is a good chance that the affiliate program is going to pass muster.

  23. USE Tax.

    Always remember USE Tax.

    You may skip out on the SALES Tax, but the USE Tax is still owed.

  24. crackle says:

    If I have my billing address in another state, but live in NY temporarily (military), am I going to get charged tax?

  25. Milkham says:

    damnit i buy tons of stuff from amazon and newegg

  26. Canoehead says:

    I believe that Tax will be charged based on the Shipping Address. I work in NY but live in NJ – no more deliveries to the office.

    Honestly, I think Amazon should cut loose its NY affiliates.

  27. nursetim says:

    I hope when they wrote out the budget. this particular line was written in pencil, because New York is going to find they are not getting the money they projected. Funny when politicians increase taxes, they never take into account people changing their behavior to avoid it as much as possible.

  28. LionelEHutz says:

    If I remember correctly, in NY, if the item purchased out of state is under $600 then you don’t owe a sales/use tax.

  29. R3PUBLIC0N says:

    @LionelEHutz
    You think New York cares what the “law” is? I’m staring at a 15 page application for a 6 month wait for a pistol license; you’d think the phrase “shall not be infringed” was somewhat clear too.

    On topic:
    This pains me deeply because I am very loyal to Newegg, but this is unacceptable. I would rather Newegg not ship to NY at all. I can’t wait to move out of this state (two months and counting…)

  30. A few really important things to know about this new law:

    1) It only applies to merchants whose NY affiliate-driven sales aggregate to $10,000 over the previous (rolling) year. That should help smaller merchants.

    2) After the initial release of the law, NY issued a Technical Services Bulletin which clarified some of the open issues in this new law. Most importantly, the TSB suggested that a merchant whose NY affiliates did not promote the merchant other than through the actual links would not have the new sales tax liability. In other words, an affiliate who doesn’t market the merchant (“Come to my site and buy from Amazon”) may not cause the problems. As a result, merchants are amending their affiliate agreements to prohibit their NY affiliates from doing any additional marketing.

    3) It isn’t yet clear whether Amazon and others will refund collected sales tax if the Amazon suit against the law is successful, nor has NY announced whether it will adjust its use tax calculation formula on its income tax returns to account for the expected increased sales tax collection.

    My view? This notion of affiliates creating nexus is a serious reach, and will likely not fly. {ProfJonathan}

  31. ZzFDKzZ says:

    This really sucks. I’m in NY.

  32. zumdish says:

    @chiieddy: I always suspected there was somebody out there who actually declared out-of-state purchases on their state income taxes. I’m amazed at your level of honesty, particularly with the way your state picks your pockets.

  33. xkevin says:

    @tande:This is tragic. The State of New York generates a ton of money on its own. The funds are just misappropriated. Perfect example: the slush funds of NYC government officials budgeted to bogus charities so they can be given out to favorables at a later date.

  34. jeffjohnvol says:

    Overstock.com is dropping their NY based affilliate programs.

    [www.channelregister.co.uk]

    I wish they would stop giving NY’ers more incentives to move down south. We like them alot, but more importantly we like them up there, ya’ll. ;)

  35. Harlan says:

    I’m a NYer, and I don’t think this is a horribly bad thing. Here’s why:

    1. I already have to pay a flat “sales tax” charge on my state taxes. If I pay up front, I won’t have to pay that charge later. So it’s not all that bad.

    2. It’s environmentally good. Before I’d have to go out of my way to order stuff from out of state. Now, local companies are on an even playing field. Less transportation = less CO2.

    3. It’s not that big a deal for retailers. If it hasn’t happened already, a company will start that will let retailers get local and up-to-date sales tax information based on address/ZIP code. Add three lines of PHP to your web site and you’re done.

  36. SBR249 says:

    Delaware – home of tax free shopping ftw!

  37. ElizabethD says:

    Damn. The end is near.

  38. gqcarrick says:

    @Harlan: It is a bad idea for people that live far from malls and retailers like me. I either have to pay to put gas in my car then go to the store and pay sales tax OR pay tax online and pay for shipping. There is no break for the little guy, so it is a bad deal overall for poor suffering tax payers in NY. We are taxed enough while no one says anything about governmental waste that goes on in Albany and NYC.

  39. HeartBurnKid says:

    I’m thinking that there’s something unconstitutional here… Only the feds get to regulate interstate commerce, the states get zero power there.

  40. AD8BC says:

    @chiieddy: Yeah. Sure you do.

    We believe you! Sure, we believe you. yeah.

    :-)

  41. agency says:

    Does anybody know which geniuses wrote, sponsored, and/or voted for this bill? It’s time to vote them out of the assembly!

  42. mike says:

    @MayorBee: My thoughts exactly. If I type “amazon.com” into my browser, it’s not being referred to by anyone.

    How exactly is this going to work?

  43. mike says:

    I hate taxes. I’m all for the consumer-based tax. Get rid of income taxes and charge everyone a consumer tax.

    That way taxes are optional.

  44. mikelotus says:

    @rmz: buying the low priced software and deploying will have negligible impact.

    @HeartBurnKid: you are thinking wrong.

    I have yet to see a valid reason why companies on the Internet continue to deserve this competitive advantage. Initially it was a good thing to allow the Internet to establish itself as a mechanism for commerce. Mission accomplished. The only argument against it seems to be the Republican “all taxes are bad.” You can complain about government efficiency in New York all you want. When the majority of New Yorkers actually vote in local elections occurs, be sure to let us know. Maybe you don’t think things like the Tappan Zee Bridge needs replacing, but if that is true, then I would argue you don’t think very well at all.

  45. lordkertaz says:

    As a NY college student, this hurts quite a bit. Amazon and NewEgg are how I find most everything I want or need in college that the nearby stores don’t have. It’s especially handy when I don’t have time to take a bus to Wal-Mart (the only option for anything in the town), or at home with no car.

    I won’t stop using them, though. It’ll just make me buy less (which I needed to do, anyway). It is a shame, though. I loved the idea of paying just the price for a hard-drive from NewEgg with no shipping and tax, or buying books and video games from Amazon with little added cost.

  46. battra92 says:

    @mikelotus: Maybe you don’t think things like the Tappan Zee Bridge needs replacing, but if that is true, then I would argue you don’t think very well at all.

    Let NYC pay for that. Seriously. Toll the lower part of I-87 more and use that for the bridge (or up the bridge toll.) That’s what Mass did with the MA Pike and you can go from Stockbridge to Chicopee (about 40 miles) for nothing since 99% of the upkeep on the Pike was on the Boston side. (By the way, the Berkshires seemed dreamlike on account of that frosting)

    Upstate gets so shanked. Latham, Troy, Schenectady etc. could all use updating in terms of travel. The Adirondack Northway is regularly packed and there’s no viable train service in upstate. Even Albany itself is in need of better infrastructure but the big politicians all come from down state.

    Upstate, especially in Washington, Rennsylear and even Saratoga Counties have a great rural community where ordering things online is a regular part of life so most people will feel this 7% hike on many things.

  47. SayAhh says:

    Just another way for Bush to collect money for the war.

  48. nonzenze says:

    “I’m thinking that there’s something unconstitutional here… Only the feds get to regulate interstate commerce, the states get zero power there.”

    Nope. A State may compel a merchant to collect sales tax (remember, you still owe the same amount of money whether or not the merchant takes it off the top or you have to report it later!) if there is a “substantial nexus” between the State and the business in question. For instance, if Newegg had a warehouse in NY, that would count as a substantial nexus. NY argues that having affiliates is essentially the same which, although I don’t like it, is indeed legally sound.

    “Just another way for Bush to collect money for the war.” You do realize this is a State tax right? (Hint: States don’t pay for the military) Bush Derangement Syndrome strikes again!

  49. SayAhh says:

    @nonzenze: Just another way for Hillary for Hillary to collect money for the war.

  50. SayAhh says:

    Damn the lack of EDIT on Consumerist! LOL

  51. chiieddy says:

    @AD8BC: @zumdish: MA has a safe harbor amount. I just take that. I rather take it than the penalties if I’m ever audited.

  52. galupo says:

    Maybe New York City should succeed from the rest of New York State people in the rest of the state waste all of our money and we get taxed by the state and the city and now this.

    Thank goodness I work in NJ most of the time so no tax for me from Newegg and Amazon.

    NYC Succeed 2010