New York's expanded 'Amazon tax' to take center stage
Battles over internet sales taxes have ebbed and flowed for years, both in the legislature and in the courts.
Now, a proposal by Gov. Andrew Cuomo to expand the universe of taxable internet sales is re-igniting the fight, with players lining up on both sides of the issue.
"We think this is a plus," Ted Potrikus, president and CEO of the Retail Council of New York State, said of the latest proposal, part of Cuomo's 2017-18 budget.
"It's basically a fair application of an existing tax and it recognizes the changes in shopping patterns," he said.
As more and more sales go to websites such as Amazon, traditional brick-and-mortar retailers are increasingly calling for a level playing field when it comes to taxes.
Also supporting the proposal are county and municipal governments who see the move as a revenue-booster that is increasingly important since property taxes are capped.
The new tax could generate an estimated $128 million to $135 million in the coming fiscal year, according to budget projections by the governor and lawmakers.
"For counties, the balance of this state budget from a plus/minus perspective hinges on this proposal," Association of Counties spokesman Mark Lavigne said in a prepared statement.
His group sees the tax as a priority this year.
"With the property tax cap firmly in place, the sales tax is the only viable revenue for counties to continue to fund state mandates and also address critical local needs," Lavigne said.
In opposition are business groups that are generally against more taxation and who point to a U.S. Supreme Court ruling that requires a retailer to have a physical location, or nexus, in the state where they are taxed.
"It is obviously unconstitutional," said Andrew Moylan, executive director of R Street, a Washington, D.C.-based free market oriented think tank.
"They are mounting this purposeful unconstitutional measure in an attempt to draw litigation that they can push to the Supreme Court," he said, referring to New York as well as the approximately half dozen other states proposing similar measures this year.
"It could be precedent-setting,'' added Doug Kellogg, spokesman for Reclaim NY, a conservative state think tank that also opposes the tax. They note that such taxes are passed on to the consumer.
This wouldn't be the state's first internet sales tax.
New York has had one since 2008 when it imposed the so-called Amazon tax that levies sales taxes on items sold through that Washington state-based retailer as well as other major online retailers.
But the sales tax hasn't applied to items sold on Amazon's "marketplace," which is described as a platform or conduit for thousands of other online retailers, many of which are mom-and-pop operations.
Under the marketplace concept, Amazon, as well as other companies such as eBay or Etsy, contend that they simply offer a venue for retailers to digitally display their wares. Those sales aren't taxed.
Cuomo's latest budget proposal would change that, stating that marketplaces with more than $100 million in annual sales would be responsible for collecting state and local sales taxes on transactions by the individual retailers using their platforms.
There would still need to be a New York ''nexus'' or some state-based connection such as a point of contact or seller in the state.
"It recognizes the changes in shopping patterns,'' said Potrikus.
"This is just making sure that we are keeping up with the way that the internet continues to evolve,'' said state Budget Division spokesman Morris Peters.
Opponents like Moylan, though, say that's counter to Quill Corp. v North Dakota.
In that landmark 1992 ruling, the court found that the state couldn't impose a use tax on an Illinois-based office supply firm without having a presence in the state.
But supporters of the tax argue that approach is outdated.
With the internet continuing to eclipse traditional retail, many have said that Congress needs to set clear guidelines for sales taxes. But they've been unable to agree on a plan.
"Every state that has a sales tax has been spending the last 20 years trying to work around the lack of Congressional action,'' said Potrikus.
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