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Tax Time for Online?
February 19, 2008

New York Governor Eliot Spitzer is proposing to require online retailers such as Amazon.com to collect state sales tax. A 1992 Supreme Court decision says states can't collect sales tax unless the store has a physical presence in the state. The question is, what constitutes physical presence? Spitzer’s office said Amazon’s affiliate program is enough, because some of the affiliates are in state.

New York stands to gain about $47 million if the plan goes through; not small change at a time when states are reporting revenue shortfalls and shoppers are shifting their dollars online, with growth rates in the high teens as opposed to the anemic 3 or 4 percent of regular retail.

But budget balancing isn’t the only reason some back the plan: Seven trade groups representing independent retailers sent a letter in December 2007 calling on 45 governors to enforce existing tax laws and collect online sales tax from out-of-state retailers who have “nexus” in the state. They emphasize fairness, as local businesses who have to charge tax go up against out-of-state retailers who don’t. So far, 18 states have responded to the letter.

What do you think? Is an in-state affliate enough of a presence? Should states go after online sales tax? 

Posted by Virtual Merchant Today on February 19, 2008 | Comments (0)