Apr

18

More on remote selling and sales taxes in New York

April 18, 2008 |

You wouldn’t have thought the New York State legislature could have gotten its act together so rapidly after the transition in the governor’s mansion (how’s that for the euphemism files?), but both the Assembly and the Senate have passed a budget that includes the so-called “e-fairness” provision first proposed by former Governor Eliot Spitzer.

Said budget is currently awaiting current Governor David Patterson’s signature.

The lobby for Main Street independent retailers — folks like the American Booksellers Association — is doing the happy dance, pleased with the victory and not feeling especially guilty about the false pretenses.

“Since 1999, the very start of our nationwide fight for e-fairness, this campaign has been about leveling the playing field for Main Street bookstores, who have had to contend with out-of-state online retailers that have skirted sales tax laws by offering consumers tax-free shopping,” said Oren Teicher, ABA COO.

Level playing field, my foot.

Those Main Street retailers never have to worry about more than one taxing jurisdiction, no matter where their customers live. Remote booksellers have to calculate the tax owed for all the different jurisdictions, which means they have to find out what county their customer lives in and what the sales tax is for that county, and that’s what they’d have to pay.

As I said when we talked about this before, state lawmakers may have taken care of the nexus requirement set by the precedent in the Supreme Court’s Quill decision, but I can’t imagine that they’d be able to successfully argue that this does not place an unreasonable burden on interstate commerce.

Of course, the provision does not kick in unless you have (a) affiliates located in NY state and (b) a minimum of $10,000 in sales to NY-based customers. If you sell books, it might be tough to get to that $10,000 from a single state. Other items, however, could put you over the $10,000 a lot faster.

I’m not sure how online microbusiness retailers are going to handle this one. Some will simply suck up and deal with the paperwork nightmare that was just visited upon them by a pack of lawmakers they didn’t elect and don’t get to vote out.

Some will get rid of any affiliates they have in NY state and refuse to accept any new affiliates from here, either. If they don’t have any NY affiliates, they can sell here to their heart’s content and still not have to deal with the new sales tax requirement. But it will mean a lot of NY-based online microbusiness owners (who do get to vote said lawmakers in and can attempt to vote them out) will be unable to look to affiliate programs to make money from their web sites.

No matter how you look at it, this is going to really suck for one set of people or another.

For the record, when I spoke to someone close to the Spitzer administration about this stuff a couple of months ago when there was such a thing as a Spitzer administration, he wanted to know how many business owners would be effected. And that’s the problem. Nobody knows, really. And, unless you can come to them and tell them that there is this huge constituency that is going to go up in flames if you do X, the politics of the situation is not compelling enough to cause lawmakers to take a second look.

That is especially true when said lawmakers are contending with the kind of budget squeeze that happens when the economy tanks.

It will be interesting to see what this does to online micro retailers and whether there will be a ripple effect if other states follow suit. The problem with this particular issue is that there is not, and never has been, anybody to tell lawmakers about the other side of the story.

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  1. Sliding Down the Internet Tax Slippery Slope | Small Business Trends on May 9, 2008 11:46 pm

    […] sellers. Unfortunately, it hurts online sellers, many of which are small businesses. Dawn Rivers Baker hits the nail on the head: The lobby for Main Street independent retailers — folks like the American Booksellers […]

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