Overstock Sues New York Over Questionable Tax Collecting Law

from the and-here's-another-one dept

Back in April, New York state signed into law a very questionable bill that effectively made any affiliates of your service (i.e., anyone advertising your services) considered as representing a “local presence” for your company for tax purposes. The law had no reason for existing other than to try to squeeze extra tax money out of online retailers. Amazon quickly sued over the law and Overstock has now followed suit, filing a lawsuit against the tax law. Overstock, of course, has taken its reaction even further, banning all New York affiliates as long as this law is in place. The effective result of the law, then, is that it actually ends up harming residents of the state while not doing very much to actually increase tax revenue. It seems quite likely that this law will get tossed out, as it seems to go entirely against earlier rulings on what constitutes a physical presence in the state.

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Companies: amazon, overstock

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Comments on “Overstock Sues New York Over Questionable Tax Collecting Law”

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26 Comments
Natrous says:

Re: Who needs to advertise?

It’s not really about advertising – it’s about the book-seller affiliates.

When you go on Amazon and buy a used book, it doesn’t come from Amazon’s warehouses at all, but rather some other book shop.

So, if they have 1 affiliated seller in NY, suddenly Amazon has a “presence” there and they can start collecting tax on everyone in the state.

Killer_Tofu (profile) says:

Similar Law

Michigan has a law something along these lines. Except instead of targeting the companies, they target the citizens directly.
In our tax forms there is a section for “Use Tax” where we are supposed to write down everything we bought over the internet that we didn’t pay sales tax on, and then calculate out our 6% sales tax on it, and then pay that to the Michigan Government.
It is preposterous. But they do not target the businesses themselves. This shows why.

Hulser says:

Re: Similar Law

In our tax forms there is a section for “Use Tax” where we are supposed to write down everything we bought over the internet that we didn’t pay sales tax on, and then calculate out our 6% sales tax on it, and then pay that to the Michigan Government.

I’m no tax accountant, but I believe that all states have a use tax. If you buy something from an out-of-state catalog or Internet site, the company doesn’t charge a sales tax, but that doesn’t mean you don’t owe any tax. It’s based on the honor system, but you are actually supposed to record those purchases and pay the tax.

So, in one way, all New York is doing is shifting the tax collection from one mechanism — a use tax, which no one knows about or pays attention to — to another, a direct line-item charge on the original bill. But in the end, your tax liability is the same.

Mitt says:

Democrats Love Taxes

Those of you who have cried over a sales tax for a book or CD should realize that if either Hillary or Obama are elected to the White House, your personal taxes will rise. This is not my opinion, both have EXPLICITLY stated they will file legislation to increase personal income taxes “on the rich” to help pay for the Republican excesses and the Iraq war. Read this blog: Read This Blog

Don’t post your indignation over a few dollars of sales tax when the tax these two loons are proposing will put the US into a huge recession. If you think it’s bad now, wait until the “rich” have to pay more.

MoldySpore (user link) says:

Newegg.com is complying

While I am very happy that Overstock and Amazon are taking the fight to this new law, it seems that many big online retailers are just going along with it.

I do thousands of $’s worth of business with Newegg and several other online computer parts suppliers, and I recently received an e-mail from all of them that stated that Starting June 1st, they will start charging sales tax to New York shipping addresses.

I wish that more large companies such as Newegg were going after this law. Hopefully the law will get tossed out, but without pressure from many large sellers, it will likely go without arguement, since so many companies are just accepting it.

Freedom says:

Ultimately a losing cause...

Now that the big online retailers generate and process a ton of orders and along with it a huge revenue stream, states are not going to look the other way on getting sales/use tax for the purchases.

Bottom line, in every state I’ve been in, you have to pay a sales tax (i.e. called a ‘use tax’) when ordering product from out of state. As part of our business, we regularly pay use taxes on Internet purchases for stuff that isn’t for re-sale. Sucks, but we do it because it is the law and one that has auditors.

If you ignore the fact that you don’t like to pay “extra” money/tax, having a taxable online purchase levels the playing field for a local merchant.

If you really have a problem with the use tax, you should also be consistent and fight to get rid of the sales tax in your state.

For what it’s worth, if they can’t get it from online retailers, expect the state auditors to start adding a check list to any audits the cross-references credit card recipients and use tax submissions along with a nice penalty to make sure the word gets out and makes everyone audit’d a poster child for the use tax law.

Freedom

Anonymous Coward says:

TAXES!

Wasn’t this country founding on the grounds of being over taxed by Britain only to do it to our own people.

$1
33% – Federal Tax
3-5% – State Tax
Excise Taxes, Cigarette taxes, sales taxes, license taxing, property taxes, liquor taxes.

More than 60% of the money an American makes goes for taxes.

REVOLUTION!!!!!!!!!!!!!!!!!

Exe says:

“Those of you who have cried over a sales tax for a book or CD should realize that if either Hillary or Obama are elected to the White House, your personal taxes will rise. This is not my opinion, both have EXPLICITLY stated they will file legislation to increase personal income taxes “on the rich” to help pay for the Republican excesses and the Iraq war. Read this blog: Read This Blog

Don’t post your indignation over a few dollars of sales tax when the tax these two loons are proposing will put the US into a huge recession. If you think it’s bad now, wait until the “rich” have to pay more.”

Gosh, and lowering taxes will pay for that war when???? I’d watch who you blame for the coming recession…

Anon says:

WTF NY

What are are the NY legislatures thinking?! Jesus Christ. I can’t get over how stupid they are. They have absolutely no idea what they are doing!

This is just like the BS tax overload they put on trucker’s gas. Now all truckers get their gas out of state. Yeah, GJ. You effectively cut out all that tax revenue. God. I wish our legislatures were competent.

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