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New York to Implement an 'Amazon Tax'
theodp writes "NY Governor David Paterson is expected to sign a bill requiring online retailers to collect sales taxes on purchases shipped to the state, even if they have no operations or employees working there. The so-called 'Amazon tax', which applies to Internet retailers who derive sales through affiliate programs, would end what for many New Yorkers had been tax-free shopping and generate an estimated $50M in revenue this fiscal year. Experts predict that other states could follow suit with similar provisions."
My thoughts exactly. This has "interstate commerce" written all over it.
The tax is supposed to be collected where the purchase is made. So, if you are in NY and order something online, you are supposed to pay the NY tax on it. However, if the retailer does not have an actual presence in the state they are not obliged to collect the tax in behalf of the state, and in that case the consumer has to declare it when filing for state taxes. I guess they have noticed that not many people declare their purchases to pay tax on them...
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Whether you order from an out-of-state catalog or an out-of-state internet retailer, you owe local sales tax on the purchase, at least in each of the three states I've lived in.
However, the out-of-state business is not obligated to automatically collect it - that's the interstate commerce part. You are supposed to self-declare it. How many people do you suppose keep detailed enough records to calculate this on their state income tax form? Or bother to declare any of it?
Courts have determined that when you buy something through the mail, the sale takes place at the seller's location not the buyer's location. Hence, when a NY resident buys something from Amazon, the sale takes place where Amazon is based--in WA. The exception is if the seller has a "substantial business presence" in the buyer's state, in which case the sale is considered to have taken place there.
It's not even a question of the seller not being obliged to collect the tax. In the example, NY has no authority to tax sales completed in WA.
To get around this, many states have so-called use taxes that are typically equal to their sales tax rates. Use tax is collected when a resident brings a good bought out of state back into their state of residence. The rationale is that the use of the item is being taxed, not the sale of the item. In practice, states only routinely collect use taxes on cars, because it's typically part of the process of registering and titling a car in a new state.
Personally, I can't see how NY is going to be able to enforce this law. They can't compel businesses outside of their jurisdiction to collect and remit these taxes without some sort of federal law.There's this part of the US Constitution granting sole authority to regulate interstate commerce to the federal government. Person A from State A buying goods from State B is an act of interstate commerce, and states have no authority to interfere in said transaction. Additionally, one state's laws cannot be applied to an entity that has no presence in that state. Without an entity having presence in a particular state, there is no jurisdictional authority.
There is little in the law that is "fair" when multiple separate legal entities all have sovereignty within their respective borders. Particular states are always able to compete for the dollars of other people by creating more favorable business environments.
I'm usually not in favor of defending federal control of something, but in the case of interstate commerce it makes a lot of sense to prevent individual states from denying access to their citizens of all the benefits of living in a confederation. If people go outside New York to shop, maybe it shows there's something wrong with the priorities of the New York legislature, rather than being "unfair" to local businesses.
From Wikipedia:
Arizona has a transaction privilege tax (TPT) that differs from a "true" sales tax in that the tax is levied on the gross receipts of the vendor and is not a liability of the consumer. (As explained in Arizona Administrative Code rule R15-5-2202, vendors are permitted to pass the amount of the tax on to the consumer, but remain the liable parties for the tax to the state.)
And Lenovo does have an office in Phoenix, so...
Most states have Sales and Use tax. The use tax is for goods purchased for use within the state. So, the GP is correct: in most states you're supposed to pay taxes on goods purchased over the Internet or through catalogs or if you purchased it from a state with no sales tax.
If you look at most state personal income tax forms you'll generally see an area for calculating tax on goods purchased from other states or over the internet. I know off the top of my head that Wisconsin, Illinois, Colorado, Ohio and Utah all have some type of line for calculating Use tax on their personal income tax forms.
How so?
It's basically two things: a use tax, and a scheme to collect it.
The Supreme Court cases on State use taxes are clear: they are Constitutional.
So that just leaves their scheme to collect. The obvious problem here is the Quill case, but they seem to have found a somewhat plausible argument to distinguish from that, so I could see this go either way on that.
Not so fast: You're right that thanks to the "dormant commerce clause," New York can't burden out-of-state commerce or commerce that just passes right through New York without stopping. For example, New York can't tax goods that pass through New York on their way from Maine to Florida on I-95, nor commerce that happens in other states.
But, almost every state that has a sales tax also has an excise tax for people who import goods from out of state. For example, in most states if you import a car into the state then you pay the sales tax on the car even if you bought it in a state with no sales tax.
New York can very constitutionally tax goods that are used in New York. And it can reach Amazon to enforce it because Amazon has "purposefully availed" itself of the New York market by advertising there and shipping orders there. See the case Asahi Metal.
Why does NY want this new tax if they already have use tax? For two reasons:
Quite frankly, don't be surprised if new taxes like these appear all over the place. The plummeting economy and rapid devaluation of the dollar means that even states have to collect money where they can.
The constitution prohibits EXPORT taxes, not import.
There's a big historic difference between the two.
New York's tax is, for all practical purposes, an import tax.
Those "use taxes" appear to be blatantly unConstitutional, too, by virtue of a part of the Constitution that explicitly says that a state may not tax imports unless
1. It has the permission of Congress
2. All of the net proceeds from the tax (after inspection costs) go to the Federal treasury. (NOTE - Federal, not State)
For the current crop of "use taxes", neither of those are the case.
You mean the import/export clause: No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports...
The terms "import" and "export" in the Constitution refer to imports and exports from other countries. See the treatise here: "Only articles imported from or exported to a foreign country, or âoea place over which the Constitution has not extended its commands with respect to imports and their taxation,â are comprehended by the terms âoeimportsâ and âoeexports."
Case: Hooven & Allison Co. v. Evatt, 324 U.S. 652, 673 (1945), holding that "These provisions were intended to confer on the national government the exclusive power to tax importations of goods into the United States."
Last I checked, Amazon shipped from within the US, so it doesn't apply at all.
> If you read on your taxes, you are supposed to declare your mail-order purchases.
Yup. And if Amazon had the smallest operation in the state of NY they would have to collect and pay NY taxes. But they don't so I'll be blown if I can see how the State of NY will be able to force a CA business to collect a NY tax, do all that bookkeeping and forward the money to NY. If they succeed it will destroy the last fig leaf of Federalism.
Democrat delenda est
if my business is incorporated in Delaware (heh, no sales tax at all, as far as I recall), then how could New York require me to do anything? All they could do is limit my ability to import goods to that state
They couldn't even do that. Congress regulates interstate commerce, not the individual states. Since you have no presence in the state, and they can't apply state laws to you out of the state, there's really nothing they can do but ask politely for you to voluntarily pay these "taxes."
Typically Federal is funded by Income, Medicare, Social Security, Capital Gaines, Fed Fuel tax, import/export tarrif, drug seisures.
State is typically funded by a State Income taxes (not all states have income tax), State sales tax (3-9%), State fuel tax, fees (license & permit). State funds typcially tend to pay for local infrastructure (roads, water, power, bridges), education, health care, arts, wild life reserves, etc. It's hard to say that the only ones that pay for those things because there is so much overlap from the cities and federal government.
County/Parish/City is typically funded by property tax (usually just land/house, though things like cars, boats, aircraft can be taxed as property), permit fees/licenses (building, business, etc), services fees (water, sewer, fire dept)
While I personally love no sales tax on the internet, it does bleed the State budgets of money, which of course creates new opportunities for the Federal Gov't to come in and pay the bills. Congress is never shy about using that money to blackmail the States in to doing what they want, by threating to withhold the funds. Federal highway funds have been used for years to push varies issues such as polution regs and drinking age limits.
Most people forget that the US is actually 50 different countries bound together by the Constitution. Each State in turn has its own Constitution which all are similar, but there are some differences. There has been a constant fight between State & Federal government over who is in control of what, generally who is in charge of the money. The Federal Government has been slowly creeping into what traditionally is State territory, sales tax just being the latest. Basically the only thing the Feds are supposed to do is protect the borders, raise a national army, print money, and regulate commerce nationally & internationally, and treaties.
What's funny these days the Fed's are a little on the broke side so many States are looking to go there own way again. Internet sales tax, education reform, polution, fire arm regulation (the federal government has very little actual say in this, though you wouldn't think so by what you see in the news), and drinking age being the hot topics of the day.
So that should make it clear as mud for you. If you did understand it all then there are many very high paying jobs waiting for you in the US.
Actually, you have no clue about this. In the colonial days, British law essentially prohibited significant industry from forming in the colonies. So if you wanted to order a manufactured good, including cloth, you had to order it from England.
Mail ordering has continued since then. In the late 1800's, many people ordered kit houses from the Sears catalog. Until the 1940's, if you didn't live in a city, you basically had to mail order many products.
Conformity is the jailer of freedom and enemy of growth. -JFK
"No state shall, without the consent of the Congress, lay any imposts or duties on imports or exports"
Article 1, Section 10.
* note that a key fact in the Asahi case was that Asahi was the manufacturer of the product in question.
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Affiliates are not agents though. They are business partners. Affiliation is a voluntary relationship and as such does not allow one party to compel another to do anything through a mandate (only through an agreement). Agents can be compelled to act on a mandate and as such are part of a company. In other words, affiliates are entities with which Amazon does business (just as it would with vendors and end-customers). NY still can't compel Amazon to do anything, BUT and (here's where you might be right) NY can compel NY-based affiliates to collect sales information for the purchases made from them (but not from all of Amazon).
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I really don't understand this idea in the US of every state doing everything individually in their own little wa
It's really best to think of the US Constitution as a treaty between the states that allows for the creation of a strong federal government but with limited powers. Thus, the commerce clause argument that both left and right wingers always have.
The only reason that the USA wound up with a strong federal government was because the previous "federal" government, the Articles of Confederation, was an abject failure and almost doomed the USA to perpetual inter-state bickering. The US Constitution changed all that, and eventually, the EU will most likely evolved into something like it.
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But the state of NY has no recourse. If they believe that Amazon is in violation of NY State tax code, they would have to raid their facilities to get evidence and then try to sue them (and possibly collect by liquidating their NY assets). But they don't have offices in NY. They don't have assets in NY. The affiliates are separate companies which do not have access to the records of customers that purchased from Amazon itself or other affiliates. My point is not that NY cannot claim to have jurisdiction. They claim it. But the reality simply disagrees.
Any guest worker system is indistinguishable from indentured servitude.