New York recently enacted a new tax law that requires Internet-based retailers to collect sales tax from customers based in New York. The tax has been informally dubbed the “Amazon Tax”. If you do any kind of online shopping you know that most of the time you don’t get charged sales tax on your purchases. The times that you do, it’s because the retailer has a physical location in New York. While the retailers don’t charge you sales tax, we’re actually supposed to report purchases made online on our state tax returns and pay sales tax. But no one ever does this and it’s hard to enforce.
Now Online Retailers Must Charge NY Residents Sales Tax
So the state isn’t collecting the tax revenue that it wants. Now that they’ve enacted this law, it forces online retailers to charge their customers sales tax. So for New Yorkers like myself, we’ll be paying an additional 8.375% on purchases we make at sites like Amazon and Newegg (2 sites I purchase from). Normally, since neither of those businesses have a physical presence in NY, they don’t have to charge sales tax.
But the new law says that as long as the online retailer has an affiliate in NY, they must charge sales tax. Note that an affiliate can be anyone – I’m signed up as an affiliate of both Amazon and Newegg and I’ve used affiliate links in my blog before. Hypothetically, if I’m their only affiliate, both Amazon and Newegg would now have to collect sales tax from any customer located in NY.
Obviously this isn’t desirable since not having to pay the extra tax is one of the primary reasons I purchase things online (aside from prices generally being lower online and the convenience of being able to find less common products more easily).
Amazon Files Lawsuit Against New York
Well now that this new tax law has been enacted, Amazon filed a lawsuit against New York over the law, calling it unconstitutional. I certainly don’t want to pay the tax and I’m fully on Amazon’s side. I can understand why the state wants to collect more tax revenue but I don’t think levying more taxes on citizens during a recession is that helpful to the state economy. Plus, like any normal person, I just don’t like giving up more of my hard-earned money to pay taxes.