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New York - New York Defends Its "Amazon Tax" In Court

Published on: February 6, 2013 10:39 PM
By: AP
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A file photo dated 20 December 2010 showing an employee of the online-retailer Amazon putting packages onto a conveyor band at the logistics centre in Bad Hersfeld, Germany.  EPAA file photo dated 20 December 2010 showing an employee of the online-retailer Amazon putting packages onto a conveyor band at the logistics centre in Bad Hersfeld, Germany.  EPA

New York - Major online retailers Amazon.com Inc and Overstock.com on Wednesday told a New York state court that they should be allowed to not charge state sales tax.

The case, in the State of New York Court of Appeals, represents one of the first legal tests of recent “Amazon taxes” meant to make online retailers start charging state sales taxes.

Amazon and Overstock attorneys argued before the court that a 2008 New York law requiring companies with affiliates in the state to collect sales tax was unconstitutional.

For New York, millions of dollars in tax collections ride on the court’s decision, expected by June.

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Retailers with a physical presence in any state must remit sales tax on purchases made either in a store or online.

But a 1992 Supreme Court decision, Quill Corp v. North Dakota, said retailers lacking a “nexus” of operation in a state need not collect sales tax.

The New York law applies the nexus concept in a novel way. It says that websites with purchase buttons for Amazon or other national retailers get fees based on sales delivered that make the sites local solicitors for the larger retailers.

Lower courts have sided with the state and found in favor of the law. But on Wednesday, some members of the five-justice panel took clear interest in the companies’ argument that web referrals do not constitute a local sales force, but rather are something more akin to buying newspaper advertising.

The idea that putting an ad in the newspaper makes the paper an advertiser’s sales force is “absurd” argued Randy Mastro, a partner with law firm Gibson Dunn, representing Amazon.

Steven Wu, attorney for the state, said web purchase buttons differ from advertising. “Advertising gets people to the door of a business, soliciting gets them to the register,” said Wu.

Between the law’s passage in 2008 and February 2012, online-only retailers collected and remitted to New York $360 million in sales tax on more than $4 billion in transactions, according to the state’s Department of Taxation.

Legislation that could resolve these issues has been introduced in the U.S. Congress, but has not come to a vote. The issue may end up before the U.S. Supreme Court. Mastro said the case will be appealed no matter the result.

The cases are Overstock.com v. New York State Department of Taxation and Finance, New York State Court of Appeals No. APL-2012-00017, and Amazon.com v. New York State Department of Taxation and Finance, New York State Court of Appeals No.APL-2012-00045.


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Read Comments (8)  —  Post Yours »

1

 Feb 07, 2013 at 01:33 AM Facts1 Says:

If recent trend is of any indication, this will go with the state. States are slowly taking every piece of freedom from its citizens under different excuses.

2

 Feb 07, 2013 at 07:50 AM pay use tax Says:

many people equate binternet shopping with tax=free shopping.
The reality is that most States, including NYS require you to file a usage tax which would be the same as the sales tax avoided.
Even if ones enjoys the perceived tax break there should be some consideration for the local store that needs to pay rent in a business street, pay wages for help that interacts with you and stock what you might decide to purchase.

3

 Feb 07, 2013 at 09:02 AM Anonymous Says:

This is Federal problem that the States are trying to address by illegally taxing and creating imaginary "stores" in the state for the out of state seller. The Feds nned to create a National sales tax and then divvy up the money amongst the states somehow. Thats the rub. How to divvy up? Based on sellers home, buyers home, ship to address? What about local sales tax? County ?
I predict the US Supreme Court will overturn the States' grab for revenue no matter how the NY court rules.

4

 Feb 07, 2013 at 09:28 AM DRE53 Says:

Reply to #1  
Facts1 Says:

If recent trend is of any indication, this will go with the state. States are slowly taking every piece of freedom from its citizens under different excuses.

This has nothing to do with freedom.
Even the most extreme capitalist agrees that governments should charge "some" taxes and that the taxes should be applied evenly amongst the population.
There was a loophole in the system which allowed foreign retailers to not charge sales tax and until online shopping became custom it wasn't worthwhile to go after them.
Now that, probably 50% of the shopping is done electronically, it is important that the government makes sure that everyone pays their fair share.

5

 Feb 07, 2013 at 10:32 AM ChachoMoe Says:

Reply to #4  
DRE53 Says:

This has nothing to do with freedom.
Even the most extreme capitalist agrees that governments should charge "some" taxes and that the taxes should be applied evenly amongst the population.
There was a loophole in the system which allowed foreign retailers to not charge sales tax and until online shopping became custom it wasn't worthwhile to go after them.
Now that, probably 50% of the shopping is done electronically, it is important that the government makes sure that everyone pays their fair share.

"fair share" hmm don't you think that all the taxes paid is not enough of a share ?? You have been so brain washed with the fact, that anything and evreything must have a tax attached to it, don't you think Amazon + the vendor is not paying any taxes on that very revenue?!

6

 Feb 07, 2013 at 12:04 PM Fair Share? Says:

Who is ChacoeMoe to decide what is a fair share?
If the law allows someone in another state to sell and ship to NY an item I sell in my shop in NY and the law lets this other avoid taxes; that is not fair.
The law quite clearly says that if you have any business presence in a state then your sales are subject to sales tax. They stretch the definition of presence to avoid taxes.
Please do not tell me they pay shipping so they should be exempt. there is no connection.
The current result is that NY stores, big and small, are being used as free showrooms. The potential clients, even frum people, will come in, try out, ask questions and then think about it all the way to their internet connection.
Perhaps our Rabonim should consider if there is any geneva, genevas daas involved. I can tell you that any frum business in NY gets loads of visitors asking for tzesdaka, none of them go to Amazon.

7

 Feb 07, 2013 at 12:21 PM DRE53 Says:

Reply to #5  
ChachoMoe Says:

"fair share" hmm don't you think that all the taxes paid is not enough of a share ?? You have been so brain washed with the fact, that anything and evreything must have a tax attached to it, don't you think Amazon + the vendor is not paying any taxes on that very revenue?!

Let's keep it civil.
My argument was that once there is a sales tax levy in place, everybody should be subject to it.
In addition, it would be unfair competition if the local store has to add on sales tax while the online retailer is exempt.
Again, I'm not justifying the tax as a whole, rather I believe that once it's here, no one should be exempt.

8

 Feb 07, 2013 at 02:59 PM Anonymous Says:

Reply to #2  
pay use tax Says:

many people equate binternet shopping with tax=free shopping.
The reality is that most States, including NYS require you to file a usage tax which would be the same as the sales tax avoided.
Even if ones enjoys the perceived tax break there should be some consideration for the local store that needs to pay rent in a business street, pay wages for help that interacts with you and stock what you might decide to purchase.

No. There is no "fairness" involved here. It is the store owner's choice to pay rent and have a physical store. It is Amazon's choice to sell via the internet. Both have pros/cons and it is up to the individual store owner to decide what will make them the most money.
State tax is only on purchases from a store in state. If I drive over the state lines and go to a different state, I pay that state's sales taxes. Not the taxes from the state I left. Therefore, Amazon and other online retailers should pay taxes in the states that have a demonstrated presence, like storage facilities- no matter where the purchase was made from.

9

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