NewEgg Stops Collecting NY Tax

Sales Tax ToddleIs online retailer NewEgg starting a war by ubruptly stopping their collection of sales tax in the state of NY?  They’ve obviously heard about it from their customers which is what spurred the change.  Basically, the state of NY decided that they couldn’t trust their residents to pay a use tax on items purchased out of state for in state use, so they’ll just make the retailer collect those taxes for them.

I can’t say that NY shouldn’t get the money, but making the retailers collect it is a bit much.  Especially when they have no discernable presence in your state.  They’ve (NY) claimed that because the retailers have affiliates that reside in NY, that they then have a presence in the state.  Of course, the retailers have lashed back with their ToS in many cases and the fact that the affiliates have no authorization to act as agents of the retailers.

And while that is true in the legal sense, I think that as affiliates we do have some unspoken (thus, not legal) authorization to sell for the company.  In fact, if we didn’t sell for the company, we wouldn’t make much money from them.  Not that it matters much to an affiliate if Amazon or NewEgg has to collect sales tax.  But what could make a difference is if NY’ers decided to find the rogue retailers to shop at.  NewEgg seems to have aligned itself in that way, but we’ll see what happens when NY responds.

NY seems to me to be the one state that operates more like a business than any other state.  The mayor of NY city has almost as much power as the Governor. With good reason, of course, as NY City is huge in comparison with any other NY city.  Potentially, the state could begin firewalling out these companies that refuse to follow the law. That would be a mistake, but I could see them trying it.  What they really need to do is to find a way to convince people to voluntarily give up the use tax on the items they buy online.  And since that isn’t going to happen with any regularity any time soon, they’ll keep on fighting the retailers to make them pay up.  I wonder how long before the lawyers fees for the state surpass the expected income from the extra taxes being collected.  It doesn’t take long to rack up $50 million in lawyers fees in NY.

About Shane Ede

Shane Ede is an IT guy by day and a Entrepreneurial Blogger by night. You can follow him here on Thatedeguy or over on Twitter and Google+.

Comments

  1. While I’m inclined to think the tax is ill-conceived to begin with, certainly trying such an expansive definition of “doing business in a state” is going to be pretty hard to defend. I think I might just let NYC take me to court and see if that really holds up.

  2. It wont hold up in court. By law they cant expect an out of state company to pay the state for purchases out of the state. Thats crazy! I am with Protoscopic, New Egg should ride it out, it wont hold up. thanks for the interesting post!

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