Posted on May 14, 2008 by Chris
Not unexpectedly, Overstock sent a letter to all of its New York affiliates notifying them that it was dropping them from the site. The issue is that New York State had enacted a law that deemed Overstock to have a New York presence simply because it had affiliates in the state and was therefore to be required to collect sales tax on behalf of the state.
This is somewhat expected given the court battle that Amazon has launched to attempt to avoid the same law. So far Amazon hasn’t dropped affiliates but I wouldn’t be surprised to see it happen.
On one hand, I understand the desire of online retailers not to be subject to taxing authorities in states they don’t operate in. On the other hand, if Amazon has any New York State employees they are certainly deducting unemployment insurance and income taxes from their paychecks and paying it to the state. The difference being that they have likely contracted with a payroll company to do it and that law already exists.
So the likely outcome here, assuming that more states pile onto this bandwagon (you can’t fight the government after all…right big tobacco?), is that a big tax processing company will step in to collect and remit sales taxes on behalf of online retailers and the consumers who have so far had a tax holiday when purchasing online are soon to be out of luck. Time to move to New Hampshire.
Thanks to the Small Business Blog for the heads up.
» Filed Under Online Regulation