The New York State legislature has signed off on an Eliot Spitzer plan where it will become etailers’ responsibility to collect state sales tax. Gov Paterson is expected to sign the bill into law.
If the bill survives expected legal challenges and other states follow suit, the value proposition offered by online retailers will be reduced (via higher expected prices). This, in turn, could slow the growth rate of etailers like Amazon (AMZN).
With the passage of the hotly debated state budget last night, New York legislators approved a bill that will require many online retailers to begin collecting sales taxes on purchases shipped to the state, even if they have no operations or employees working there.
New York Governor David Paterson is widely expected to sign the measure.
The so-called “Amazon tax” closes a loophole for Internet retailers who derive sales through affiliate programs in which Web site owners place a link to the merchant on their site and earn a commission on sales made from referrals. In lobbying for the bill, the industry group representing New York retailers had argued that the exemption from the sales-tax collection requirement gave out-of-state online retailers an unfair competitive advantage…
The controversial bill ends what for many New Yorkers had been tax-free online shopping, and experts predict that other states could follow suit with similar provisions. Consumers are required to report purchases they make online from out-of-state companies on their tax returns and remit a use tax, but many people are either unaware of that obligation or ignore it. Collecting those taxes from individuals has been an administrative impossibility.
See Also: Amazon to Eliot Spitzer: Pound Sand
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