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.

Phew! No Internet Tax for 4 More Years

The house passed a bill by a margin of 405-2 that will extend the ban on an Internet Tax for four more years.  Essentially, it makes it nearly impossible for states to tax any ISP connection, DSL connection, and also prohibits any tax that treats online goods differently than the same goods bought in a brick and mortar store.

Of course, the Senate will still have to pass the bill to make it law, but it’s a resounding step in the right direction.  I’m not entirely sure why the state can tax cellular phone service, so I obviously don’t think they should be able to tax internet connections.  And I really don’t think that online sales should be treated any differently.

That isn’t to say that online sales shouldn’t be taxed.  As more and more sales happen online, the pressure to be able to add a sales tax to those sales is going to increase.  I dislike taxes as much as the next guy, but an online sales tax seems unavoidable.  All this bill does is to make sure that they can’t treat those online sales differently by doubling the tax or something similar.  Of course, they can’t do a half tax bit either, but who seriously believes that the states would do something half way?