It Depends What Your Definition of “Tax Increase” Is

Apparently “everything changes on Day 1” referred only to Spitzer’s campaign promises. Remember when Eliot promised repeatedly not to raise taxes? Well, he’s at it again.

If you plan to do any Christmas holiday shopping on the Internet, better get it in before November 30. On December 1, the Spitzer administration is going to start forcing Amazon.com and many other online retailers to collect sales tax on purchases originating in New York State.

As most everyone knows, in cyberspace you only have to pay sales tax when the retailer has a physical presence in your state. So, for example, I have to pay 8.375% sales tax on electronics purchased from BestBuy.com, but not from Amazon, because Best Buy has brick-and-mortar stores here.

Now, Spitzer is claiming that any Internet retailer with an affiliate program — and at least one affiliate residing in New York — has a “physical presence” in New York and must collect sales tax on all New York sales. In other words, if you put an Amazon link on your personal site that gets 50 hits on a good day and you live in New York, you are the physical embodiment of Amazon in the Empire State. And it’s not just sales originating from the affiliate sites that are subject to sales tax. Once that physical presence is established, all sales from New York for that web retailer get taxed.

State officials estimate the new policy will bring in $100 million in new tax revenues each year. Of course, the masters of Doublethink also insist it’s not a tax increase.

UPDATE: Just minutes after uploading the post above, I read that Spitzer is backing down on this Internet sales tax scheme… for now. Apparently his aides were worried the Republicans would talk mean about him again, like they did with the driver’s license thing. The steamroller has become the steamrolled.

3 comments for “It Depends What Your Definition of “Tax Increase” Is

  1. November 22, 2009 at 11:52 pm

    I’ve been interested in taxations for lengthier then I care to admit, both on the individualized side (all my employed life!!) and from a legal stand since passing the bar and following up on tax law. I’ve supplied a lot of advice and corrected a lot of wrongs, and I must say that what you’ve put up makes complete sense. Please uphold the good work – the more people know the better they’ll be armed to handle with the tax man, and that’s what it’s all about.

  2. jeanie mcdowell
    March 16, 2008 at 3:19 pm

    these stories are beginning to make me wonder about politicians in general. We have a case here in brunswick county north carolina where a school board member had a restraining order taking out on him for threatning his mistress and he was married. You can view this under brunswick county north carolina school board member.

  3. according to the grapevine
    November 19, 2007 at 1:29 am

    Although Governor Spritzer had backed down from this latest folly to, as the article states, “force Amazon.com and many other online retailers to collect sales tax on purchases originating in New York State,” the question that needs to be asked is: How can he do this when there isn’t even a law that requires New York State merchants to collect sales tax? That bears repeating: There is no law in New York State (or any other State that imposes a sales tax) that explicitly requires anyone to collect sales tax. (There are, however, laws, along with penalties for noncompliance, that require anyone who collected sales tax to turn them in to the government.)

    If this is so, then why don’t the NYS Legislature fix this apparent anomaly by enacting such a law? They would, but except for a slight inconvenience. Namely, the United States Constitution and specifically the Amendment 13, which states: “1. Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction.”

    What does Amendment 13 have to do with collecting sales tax? Simple. The Legislature would violate this Amendment if it enacts a law to force merchants to be unpaid tax collectors, which would be a form of “involuntary servitude.”

    Also, an obscure part of the U.S. Constitution (well, obscure if you’ve never read the U.S. Constitution through), Article 1, Section 10, Clause 2 is another impediment to States from collecting sales taxes willy-nilly:

    “No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Control of the Congress.”

    Now, the “ground rule” concerning collecting and paying sales tax in the instant case is, as expressed in the Serf City article: “[a]s most everyone knows, in cyberspace you only have to pay sales tax when the retailer has a physical presence in your state. So, for example, I have to pay 8.375% sales tax on electronics purchased from BestBuy.com, but not from Amazon, because Best Buy has brick-and-mortar stores here.”

    Other than this “ground rule,” however specious it may be, Governor Spritzer cannot force New York State citizens to pay sales tax on goods they purchase outside New York State (let us not forget that a “sales tax” is a tax not on goods purchased, but on people based on the goods they purchased), or force merchants from outside New York State to collect sales tax from these citizens because he would then be laying an “impost or duty” on “Imports and Exports” between States. This is a no-no, according to Article 1, Section 10, Clause 2 of the U.S. Constitution.

    So, since no merchant is required to collect sales tax, and since States cannot levy sales tax on items bought from other states (notwithstanding the “ground rule”), there is, however, one way Governor Spitzer can try to collect sales taxes. He can have employees from the Department of Taxation and Finance stop cars coming in from New Jersey crossings, such as the GW Bridge, and have these employees make drivers open any bags they have to declare their purchases and pay sales tax. These employees could also be stationed in malls or shopping centers throughout New York State where they would likewise force shoppers to open their bags and declare their purchases and pay sales tax. Unfortunately for the Governor, this can’t be done unless Fourth Amendment search warrants, vis-a-vis the U.S. Constitution, are issued to each shopper first.

    If you’re now getting the idea that the U.S. Constitution is an impediment and inconvenience to Governor Spitzer and others of his ilk in government (read: politicians and bureaucrats) to collect sales taxes, that’s because the U.S. Constitution is supposed to be an impediment and inconvenience to Governor Spitzer and others of his ilk in government, period.

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