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By | Cade Metz 13th February 2008 01:08

Amazon pooh-poohs (ingenious) New York net tax plan

Affiliates get physical

More than happy to let the people of New York avoid paying vast amounts of internet sales tax, Amazon.com has spoken out against a new net tax plan from Governor Eliot Spitzer.

Back in November, The New York Sun leaked word that Spitzer was poised to roll out a clever new policy that would force big name e-tailers like Amazon to collect sales tax on all items purchased from his great state.

Spitzer bagged the plan that same day, his office saying that the pre-Christmas season was "not the right time to be increasing sales taxes on New Yorkers." But in late January, the plan resurfaced as part of his proposed state budget, and it's now awaiting approval from legislators.

Using an untried legal argument, Spitzer's plan would force uber online retailers like Amazon to collect an estimated $47m in New York sales tax during the coming fiscal year - then another $73m the following year. And Amazon doesn't like that.

Though he couldn't fit in an interview with The Reg until tomorrow, Amazon vice president of global public policy Paul Misener told The AP that Spitzer's proposal "would be a radical departure from anything currently being done in the U.S."

This is certainly true. But a radical departure isn't necessarily a bad thing.

Today, in accordance with a 1992 Supreme Court case involving an old-school mail order business, e-tailers are required to collect sales tax if they have a "physical presence" in the state where a customer resides. Otherwise, the onus is on the customer to declare the purchase on their next tax return. They call it "use tax."

Of course, not every American, um, remembers to pay their use tax. Indeed, some tax forms still fail to include a line item for such things.

At the moment, Amazon does not collect sales tax from New Yorkers. It doesn't have a warehouse or an office or any other corporate facility in the state. But Spitzer is arguing that lawmakers are ignoring another portion of the company's physical presence: Members of the Amazon affiliate marketing program. You know, independent web sites that drive traffic to Amazon.com in exchange for a cut of the profits.

In the words of the governor's budget book, his new policy would create "an evidentiary presumption that certain sellers using New York residents to solicit sales in the State are vendors required to collect sales and use taxes."

Clearly, Amazon doesn't like this proposal because it would hurt their bottom line. If customers can't "save" on sales tax, they're more likely to buy from a good ol' brick and mortar shops. And groups like NetChoice and the National Tax Payers Union don't like it because it would force their peeps into shelling out more dough.

"A lot of people have their eyebrows raised here," says Braden Cox, a counsel with NetChoice, a public advocacy group that promotes "choice" on the net. "This is a very aggressive interpretation of US constitutional law."

Though we prefer the quote we collected from Pete Sepp, a spokesman for the National Tax Payers Union: "It's possible that such a policy will be inflicted on e-tailers such as Amazon, but we doubt it would stand up in a court of law."

That said, we like Spitzer's plan. A state has a right to its sales tax. And we have a soft spot for clever arguments. ®

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