Gov. Spitzer's Call to Clarify Sales Tax Laws Earns Praise From NY Retailers

On Tuesday, January 22, New York State Governor Eliot Spitzer announced that he is seeking legislative approval to clarify what constitutes nexus for online retailers selling to New York State residents. The provision, which is contained in the state's Executive Budget-Briefing Book, stipulates that online retailers that have certain selling activities in the state, such as Amazon.com, should be required to collect and remit sales tax for sales made in New York State. It is expected that, if approved, the provision would raise $47 million for the state in 2008-09, and $73 million in 2009-10, according to the Budget-Briefing Book.

"We applaud Governor Spitzer's proposal seeking legislative approval for New York State to require Internet sellers such as Amazon.com to collect sales tax in New York," said ABA COO Oren Teicher. "Amazon, which has a market capitalization of $33 billion, should not have unfair competitive advantage over New York-based retailers, including the independent booksellers in the State of New York. If approved, this provision would play a significant role in leveling the playing field for all the state's businesses and help secure needed revenue to support essential local services."

The Internet sales tax provision, on page 115 of the Budget-Briefing Book [1], reads: "E-Commerce Retailer - Registered Vendor. Creates 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. This will correct a competitive disadvantage experienced by New York-based businesses by subjecting out-of-State vendors to the same sales tax requirements. This will raise $47 million in 2008-09, and $73 million in 2009-10."

Reaction to the sales tax proposal was very positive among New York State's independent booksellers who spoke to BTW.

"I was very happy to read that Governor Spitzer was investigating this," said Marianne Bastian of Runaway Books in Sayville, New York. "I'm proud that I sent a letter to Governor Spitzer [regarding e-fairness], and I am happy that ABA made it so easy to do ... I think [the proposal] will be successful, now that [Governor Spitzer] knows it's not an even playing field. It's nice to feel that your voice is being heard and that what you think does matter. It's important to get your voice out there."

"I think it's way past time that Amazon.com collects sales tax," said Jonathon Welch of Talking Leaves Inc., in Buffalo, New York. "It's a terrifically unfair advantage that has cost the states in which they operate a vast amount of money. If the state is not collecting sales tax, they are collecting it in other ways. [The proposal would] even the playing field for us quite a bit."

Other New York-based retailers welcomed Spitzer's Internet sales tax provision, too. On Tuesday, the Retail Council of New York State lauded the proposal [2].

"Governor Spitzer's proposal is a bold and necessary initiative that will help small retailers in New York State who today struggle to compete with Internet giants," said Retail Council President and CEO James R. Sherin. "These on-line merchants -- none of which are based in New York -- operate with an unintended competitive advantage fostered by a confusing sales tax landscape.

"New York must stop sanctioning sales tax avoidance practices and stop giving unfair pricing advantages to out-of-state retailers at the direct expense of the storefront, taxpaying merchants who are the backbone of our Main Street economies across this state."

Last November, ABA CEO Avin Mark Domnitz and more than 30 New York State booksellers wrote to Governor Spitzer to call for the equitable collection of sales tax. Their letters noted how New York state-based businesses contribute significantly more economic benefit to their communities than do national chains. Treating all retailers fairly, their letters said, would help ensure that local businesses are equipped to face the current challenging economic conditions. In addition, they stressed, "We are in no way discussing any new 'Internet taxes.' We are simply urging you to untie the hands of your state taxing authorities and to allow them to enforce the tax laws already in place."

In December, ABA and six other independent trade groups joined to urge the governors in all 45 states with sales tax to equitably enforce their existing laws. Last week, the groups followed up with officials from the 14 states that responded to, or acknowledged, the groups' December letter [3]. The trade groups also sent a second letter [4] to the governors in the remaining 31 states with sales tax that had not yet responded to the groups' initial letter.

To read more on this topic, click here [5]. For more information regarding the online sales tax issue, check out ABA's E-Fairness FAQ [6]. --David Grogan [7]