Just a few weeks ago, the U.S. Senate approved a seven-year extension for the moratorium on the taxation of online purchases.
The original moratorium, passed in 1998, was set to expire November 1st. But both the House of Representatives and the Senate have passed extensions. The version from the House was for four years.
But New York Governor Eliot Spitzer wants all Internet taxes all the time for citizens of the Empire State, according to the New York Sun.
“New Yorkers going Christmas shopping online at Amazon.com will find an 8.375% surprise at the virtual cash register, courtesy of Governor Spitzer, who is moving aggressively to collect Internet sales taxes that have gone widely unenforced.
Under a new policy, major electronic retailers, such as Amazon.com, will be required to collect sales tax on all purchases from New York. The policy, based on a novel legal theory, could hasten the end of the Internet’s era as a duty-free marketplace if other states follow New York’s lead.”
In the past, online retailers were held to the same standard that the U.S. Supreme Court set for mail-order vendors: The seller only needs to collect the tax on purchases in states where the vendor has a physical presence, such as a storefront or salesman.
But according to a tax memo recently released by the New York state tax department, companies will lose this exemption if they have affiliates.
“At issue is the “affiliate program” used by many e-retailers. Web site operators can provide a link to an e-retailer in return for a commission on any sale resulting from customers using the link. While the affiliate program may consist of little more than a non-descript advertisement on the computer screen, the tax consequences may be huge: New York state says it is the equivalent of having an instate salesperson.”
On the heels of Spitzer’s humiliating decision to abandon his plan to issue driver’s licenses to illegal immigrants, he comes out with this whopper?
I could see this having negative ramifications on a company like Amazon – all of a sudden it’s less attractive to customers to purchase from them. So Amazon might decide to stop working with affiliates in New York if that’s what it takes.
Net result: tens of thousands (or more) of affiliates in New York with less money in their pockets.
Or maybe the affiliates could get hosting in other states (if they don’t have it already)? If their Web site doesn’t reside in New York, perhaps this would be null and void?!
Anyhow, Merry Christmas, Grinch Spitzer.