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Judge Dismisses Amazon Suit Over NY Sales Tax

Old 01-15-09, 09:50 AM
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Judge Dismisses Amazon Suit Over NY Sales Tax

Crap. The sales tax pretty much negates my Amazon Prime savings.

http://www.dailytech.com/article.aspx?newsid=13938

Judge Dismisses Amazon Suit Over NY Sales Tax

Amazon loses a New York court case that has been ongoing for around nine months


New York State Supreme Court Justice Eileen Bransten tossed out Amazon.com's lawsuit challenging the state of New York's right to collect tax from out of state transactions through the retailer. Amazon reportedly failed to state a proper claim and "there is no basis upon which Amazon can prevail," according to Judge Bransten.

Amazon first filed a complaint in April, claiming the law was unconstitutional and too broad and vague.

The law comes into effect if a company doesn't have an office in New York, but has one or more workers who serve as online agents in New York. For example, New York residents didn't need to pay taxes on products sold because Amazon doesn't have official operations there -- Washington state shoppers, however, must pay taxes, as the state has a headquarters and warehouses there.

State officials widened how "presence" could be described, as Amazon said advertisers aren't classified as official agents for Amazon.com. The company hoped to have the law changed and have the state pay for all legal costs.

The popular online retailer also has an Associates Program that helps unaffiliated web site operators get paid when advertising Amazon on their own web sites. New York law indicates this eventually ends up being solicitation of business while operating in New York.

New York state officials said the new "Amazon tax" closes a "tax loophole" that should have never existed in the first place. Furthermore, the judge said the New York law was "carefully crafted" and didn't offer a blanket tax on all Internet sales, and didn't unfairly target Amazon.

Even though the lawsuit has been thrown out by lawmakers, Amazon can still appeal the decision.

Amazon spokespeople said the new law unfairly targets Amazon, and the state could generate as much as $50 million through 2011 from the tax. Taxing goods sold both in-state and shipped in could offer the state a new revenue stream to make up for the state's monetary struggles.

However, booksellers in the state are happy to see Amazon finally get taxed.

"The state of New York was subsidizing sales on Amazon to the degree of 8 percent," American Booksellers Association Oren Teicher chief operating officer told the Associated Press. "That was unfair. The government ought not ever be in business of picking favorites among competing businesses."

New York recently unveiled a new entertainment tax that would tax all songs through Apple iTunes, as the state's government faces a massive $15.4 billion deficit
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Old 01-15-09, 10:49 AM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

the judge did have a point, Amazon is using it's affiliates as a sales force. all they have to do is get rid of the NY affiliates and they should be OK
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Old 01-15-09, 12:28 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

So because Amazon has affiliates with residence in NY, then NY residents have to pay tax? Even though they dont have any official presence in the state?
And by affiliate, are they talking about a website like dvdtalk?
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Old 01-15-09, 12:45 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

This does not look good for the other places where Amazon does not yet charge sales tax but where they have affiliates. I'm pretty sure there are affiliates in CA, right?
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Old 01-15-09, 02:36 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

New York recently unveiled a new entertainment tax that would tax all songs through Apple iTunes, as the state's government faces a massive $15.4 billion deficit
See, when cities can't manage their budgets, that is all they know how to do...tax anything they can get away with.
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Old 01-15-09, 11:44 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Originally Posted by fujishig View Post
This does not look good for the other places where Amazon does not yet charge sales tax but where they have affiliates. I'm pretty sure there are affiliates in CA, right?
sheesh all you care about is you eh? _wink_

but imho, this aint gonna happen soon just in ca. i have a feeling we are all going to start paying taxes across borders sooner or later.

California warns companies they may owe use tax
State Board of Equalization sends letters advising service companies to check out-of-state purchases for the last three years or risk an audit.
By Marc Lifsher
December 29, 2008
Reporting from Sacramento -- Over the last six months, California tax officials have quietly mailed thousands of official letters to doctors, beauty salons, insurance agents and other service providers looking for some badly needed state tax revenue.

The letters asked these service businesses to check records on their out-of-state purchases for the last three years and pay any back taxes they owe. Failure to do so could lead to an audit of the taxpayer's books going back eight years, the letter warned.

Californians know all too well about sales taxes they pay almost every day on purchases. But less known is the "use tax" that the state requires consumers to pay on goods bought out of state.

California consumers, both individuals and businesses, must pay a use tax if they buy something in another state and if the seller does not collect a sales tax on the purchase. The use tax -- the same amount as the sales tax -- ranges from 7.25% to 9.25% depending on where the buyer lives.

For example, someone who buys books, records, an expensive camera or furniture from Internet retailer Amazon.com would be required to send the state a check covering the specific use-tax obligation. If that's too much trouble, the buyer instead is expected to keep a record of out-of-state purchases and report a year's worth of use-tax obligations on a designated line on the state income tax form.

Compliance with the use-tax obligation is spotty at best, say officials at the California Board of Equalization, the agency charged with collecting sales and use taxes, among others.

To critics of the use tax, the state's new letters on official letterhead are heavy-handed. But supporters say it's a matter of tax fairness.

There's nothing "scary" about the letters, other than they come from a government tax agency, said Board of Equalization Chairwoman Betty Yee. "Much as it feels like a fishing expedition, it is the law. Honestly, a lot of these businesses may not be aware of what the law is" and that it's been on the books since 1935.

Maximizing revenue from existing taxes is crucial at a time when the state government faces a projected $41-billion budget gap over the next 18 months, officials say.

California, 44 other states and the District of Columbia are eager to collect taxes on out-of-state purchases. But it's highly complicated. Out-of-state businesses must collect sales tax if they have stores, warehouses or any physical presence in the taxing state.

If not, the California buyers are supposed to pay use taxes instead. But many local businesses and individuals ignore it.

Enforcing the use-tax law has proved to be time-consuming and costly. Appeals from taxpayers involving out-of-state sales of big-ticket items, such as airplanes and magnetic resonance imaging machines used in medical diagnoses, have led to complex legal wrangling that has been difficult to resolve.

That's why California tax authorities now are focusing their efforts on a more manageable target: service businesses.

The board's collection effort is part of a so-called tax gap program aimed at collecting an estimated $1.1 billion in unpaid use taxes, based on U.S. census and other data.

Businesses owe about $682 million and individuals, $409 million, the state says. The average business owes $340 in back taxes and households owe $436, the Board of Equalization says.

Board of Equalization officials say the stepped-up collection program primarily is an "educational" campaign.

Six thousand letters have been sent since July, netting $2.6 million in back-tax payments, and 25,000 letters are expected to go out in the fiscal year that ends June 30.

Collecting the tax, officials say, is a matter of fairness to ensure that businesses pay required taxes whether the goods come from inside or outside California. But recipients of the state letters don't necessarily see it that way.

"This isn't education. This is punitive," said a San Francisco businessman who received the letter and asked that he not be identified for fear of closer scrutiny by tax authorities.

Small-business owners should be aware that they have a legal obligation to pay use taxes on future out-of-state purchases, such as computer equipment or office supplies, he said. But they should not be forced to go through years' worth of old receipts to calculate back taxes that are filed under the threat of being punished for perjury or fraud.

The letter on state of California stationery, complete with a case reference number, has a tone that could be considered intimidating by a small-business owner.

"Industry studies indicate there is a likelihood that your business has purchased fixtures, equipment, machinery, furnishings, consumable supplies or other items from retailers outside California for use in California," reads one communication to a San Francisco company dated Dec. 11.

After reminding recipients that the state has the right to audit their business activities for as many as eight years, the letter instructs them to "review your records and self report" untaxed purchases from the last three years.

It asks that all taxes, penalties and interest charges be paid to the state within one month of getting the letter.

Small-business groups welcome the information but don't like the way the board is trying to "frighten" them.

"This is a classic example of government efforts to shock-and-awe small-business owners," said John Kabateck, executive director for California of the National Federation of Independent Business, which has 23,000 members in the state.

But liberal-leaning tax and budget watchdog groups applaud the Board of Equalization's new aggressiveness in trying to collect use taxes.

"There's a ton of avoidance that needs to be addressed," said Lenny Goldberg, executive director of the California Tax Reform Assn., a union-backed group that advocates for a strong public sector and tax fairness.

"This is a tax that is due and payable," he said. "It's a question of doing it in a way that maximizes the opportunity to collect some real revenue in a way that doesn't feel oppressive to the taxpayer."
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Old 01-16-09, 04:07 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

This sucks. I live in NJ and we are just as broke as NY, I hope my state doesn't start thinking about this.
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Old 01-16-09, 06:23 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Yeah, I remember reading that article. CA is just as broke as NY (and apparently NJ). They won't even be able to give out tax refunds this year, they'll give IOUs. When NY started this whole tax-at-Amazon thing, I was really surprised, but I guess it was just a matter of time.

Not to mention, they want to raise the sales tax here anyway. More money for them.
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Old 01-16-09, 06:35 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Hmm, hope they don't start taxing in CA. That's a big reason i've spent so much at Amazon lately.
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Old 01-16-09, 11:35 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

That sucks. I think I time will eventually come when we always pay taxes on internet purchases though.
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Old 01-17-09, 02:10 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

This is why sales taxes are a farce. I do NOT favor taxes; but if we have to have them (and we do) then a flat income tax with NO deductions once again proves it is the simplest method.

Now, having said that ... government needs to live within its means. Budget shortfalls do NOT justify new taxes and/or revenue streams.

I get a kick out of the story a few weeks ago about gas taxes. I think it was the state of Washington that has determined that they are "losing" money since gas prices have gone down and want to pass a new gas tax to "make up" the difference ... um no, you aren't losing money. You raked much more than you should have because you allowed the oil companies to gouge the consumer and you piggybacked off of that.
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Old 01-17-09, 03:28 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Judge Dismisses Amazon Suit Over NY Sales Tax
It goes from bad.....

New York recently unveiled a new entertainment tax that would tax all songs through Apple iTunes, as the state's government faces a massive $15.4 billion deficit
...to worse. Targeting one legal downloading service when there are several others? There was a recent BBC report about how even though more people are using legal downloading services there are many more that prefer to get their music for free and not exactly legally. I don't condone piracy, but what I can see is some individuals who would have bought something off of iTunes legally but changed their minds and got their stuff illegally because a bunch of morons that overspent felt the need for that person to pay more for whatever it is people are listening to these days.

Dear people of NY and other states that face stuff like this,

Amazon and iTunes being taxed isn't necessarily the biggest issue in the world right now, but no matter which way a politician or devil's advocate tries to spin it this is quite unnecessary. It simply gives your respective state government no reason to be responsible with budgeting because when they overspend they'll just find something else to tax. There are people who aren't really bothered by this, including myself since luckily I don't live there and don't plan to. But for anyone that is a little miffed I suggest you start to become vocal about such things and not just here on DVDTalk or the internet for that matter. I'd also keep this in mind the next time you head out to the polls. Demand a more responsible and less sales tax heavy government.
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Old 01-17-09, 11:40 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Originally Posted by Abob Teff View Post
This is why sales taxes are a farce. I do NOT favor taxes; but if we have to have them (and we do) then a flat income tax with NO deductions once again proves it is the simplest method.
A flat tax may be the simplest, but that doesn't mean it's the best.

Budget shortfalls do NOT justify new taxes and/or revenue streams.
This isn't a new tax or revenue stream, just a new way to enforce it. Technically, as a citizen of your state, you're required to pay a sales tax on all your purchases, including those that originated out of state. However, very few people voluntarily pay this tax when they file taxes, which is why states require companies that operate within the state to collect it from us at the time of purchase instead. People buying from Amazon and other online stores were just enjoying a loophole in enforcement up to this point.


Originally Posted by Doctor Zoidberg View Post
Targeting one legal downloading service when there are several others?
The entertainment tax doesn't tax just iTunes, but all online downloading services. The author of the article presumably picked iTunes as an example. Presently, you'll get taxed for a CD, but not taxed for the same music purchased online. The reason is because digital delivery wasn't a consideration when the present tax laws were put in place. The reasoning for this "new" tax is to simply put online media on the same playing field as physical media.

http://www.variety.com/article/VR111...ryid=1064&cs=1
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Old 01-20-09, 12:12 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Originally Posted by big whoppa View Post
See, when cities can't manage their budgets, that is all they know how to do...tax anything they can get away with.
I'm still waiting for tax-happy MD to get in on this action.
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Old 01-20-09, 02:24 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

So, does anyone know what constitutes an "Affiliate" when talking about having a presence in a state purposes?"
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Old 01-21-09, 12:47 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Originally Posted by jjcool View Post
So, does anyone know what constitutes an "Affiliate" when talking about having a presence in a state purposes?"
I'm not sure, but my first thought was the Amazon "sellers" and Z-shops.
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Old 01-21-09, 01:56 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Originally Posted by jjcool View Post
So, does anyone know what constitutes an "Affiliate" when talking about having a presence in a state purposes?"
From the original article:
The popular online retailer also has an Associates Program that helps unaffiliated web site operators get paid when advertising Amazon on their own web sites. New York law indicates this eventually ends up being solicitation of business while operating in New York.
So if someone in New York has uses affiliate links on the web and gets paid, the site they were linking to has to charge sales tax on NY customers, even if the site has no other employees in NY.
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Old 01-21-09, 02:02 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Originally Posted by BuckNaked2k View Post
I'm not sure, but my first thought was the Amazon "sellers" and Z-shops.
Originally Posted by Jay G. View Post
From the original article:

So if someone in New York has uses affiliate links on the web and gets paid, the site they were linking to has to charge sales tax on NY customers, even if the site has no other employees in NY.
Well, thats kind of BS. Teh amazon sellers are completly independent entities from Amazon. All amazon does is collect payment and disburse it. The affiliate links one is bonkers too. You dont even have to go through that specific affiliate's link to get dinged for sales tax? That isnt right. The information may be right, I'm referring to the practice of charging sales tax due to these instances as 'not being right".
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Old 01-21-09, 02:28 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

I wonder if that is specific to New York law (though I'm sure other states' laws can easily be rewritten in the name of collecting more taxes). It seems like if Amazon ever did something like advertise during the Superbowl, every state that had a tv station that ran the ad would get to collect sales tax, as that's a paid ad as well.
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Old 01-21-09, 10:38 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Originally Posted by jjcool View Post
Well, thats kind of BS. Teh amazon sellers are completly independent entities from Amazon. All amazon does is collect payment and disburse it.
And host the item listing, and provide a refund and disputed purchase resolution method. However, the New York law doesn't reference Amazon sellers.

Originally Posted by jjcool View Post
The affiliate links one is bonkers too. You dont even have to go through that specific affiliate's link to get dinged for sales tax?
I don't have to go to a Best Buy in my state in order to get charged for sales tax on their online site, where the product may ship from another state. If a company has so much as one employee in a state they have to collect the sales tax. All the new law does is expand the idea of a state footprint to those who technically aren't "employees," but still solicit business for Amazon and get paid for it.

http://news.cnet.com/8301-10784_3-9934188-7.html

If Amazon doesn't like the idea of collecting sales tax in NY, they can always drop all their NY affiliates, like Overstock did:
http://news.cnet.com/8301-10784_3-9944934-7.html

Originally Posted by fujishig View Post
I wonder if that is specific to New York law.
It's a new law in New York that went into effect in June of last year. Amazon's been collecting New York sales tax for a few months now.

Originally Posted by fujishig View Post
It seems like if Amazon ever did something like advertise during the Superbowl, every state that had a tv station that ran the ad would get to collect sales tax, as that's a paid ad as well.
Affiliates don't get paid for advertising, they get paid a commission based on what people buy on Amazon after going through one of their referring links.
https://affiliate-program.amazon.com...ding/main.html

Since TV stations don't get a commission, but just charge for the advertising, they're not covered by this law.
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Old 01-22-09, 02:54 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Originally Posted by Jay G. View Post
I don't have to go to a Best Buy in my state in order to get charged for sales tax on their online site, where the product may ship from another state. If a company has so much as one employee in a state they have to collect the sales tax. All the new law does is expand the idea of a state footprint to those who technically aren't "employees," but still solicit business for Amazon and get paid for it.
I am aware of Best Buy charging tax in states where they have a presence with actual employees. My question, is why are these affiliates considered employees when they actually arent.
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Old 01-22-09, 03:33 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Originally Posted by jjcool View Post
I am aware of Best Buy charging tax in states where they have a presence with actual employees. My question, is why are these affiliates considered employees when they actually arent.
They aren't considered employees, but are considered the same as employees, apparently because they earn a commission.

http://news.cnet.com/8301-10784_3-9934188-7.html
...the state passed a new law, as part of its state budget, that expanded the meaning of "solicit" to include any company that pays New York-based entities for "directly or indirectly referring customers" to its retail business...
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Old 04-16-09, 12:26 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

The days of avoiding sales tax on a lot of internet purchases might be nearing an end if this bill gets traction. Looks like it might get introduced next week, and with Democrats in control it won't surprise me if if goes through.

http://news.cnet.com/8301-13578_3-10...ml?tag=nl.e703

April 15, 2009 5:00 PM PDT
Tax-free Internet shopping may be at an end
by Declan McCullagh
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Old 04-16-09, 12:58 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Ugh... I guess with tax revenues badly needed, they needed to do this. Where does the money go, though?

If I'm in CA, and I buy something from NY, I pay the CA rate, but does that all go to CA? Also, there are many, many different local sales tax rates here... how to divy it up?
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Old 04-16-09, 02:15 PM
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Re: Judge Dismisses Amazon Suit Over NY Sales Tax

Originally Posted by fujishig View Post
If I'm in CA, and I buy something from NY, I pay the CA rate, but does that all go to CA?
Yes. It doesn't matter where the store is located, they're collecting the taxes that you owe to your state.

Also, there are many, many different local sales tax rates here... how to divy it up?
I'd assume they'd charge the local tax based on billing address. So you'd get charged the tax for your locale, same as if you went into a store near you, and your local government would get their share of that tax.
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