Thoughts, information and reflections about technology

New York to try to charge sales tax on Intenet Purchases

New York State is trying to make online retailers collect sales tax from purchases made by New York residents.

Given the state of the Internet right now, this is going to be a nightmare for online merchants. Currently they say they are only going after ‘large retailers’. In truth, given the way that government is known to work, they will require all online retailers to collect NY Sales tax (remember that politicians buy votes by confiscating money from one group of people and handing that money out to other groups of people. Their appetite for taxes is insatiable)

I guess New York needs the money. You can’t tell me that the former governor Spitzer wasn’t using some tax money during his flings with a $5000/night mattress warmer. The new gov, Patterson isn’t any better in that there are serious allegations that state funds were involved in his junkets to the No-Tell Hotel with hookers. So folks, fork it over, NY needs cash.

Anyway, why is this a bad idea?? Here are a couple of reasons

  • Taxes on Internet sales have a high ‘profit margin’ for the state. Since there isn’t a brick and mortar presence, there aren’t additional requirements for infrastructure such as police, fire etc. Most of the goods will move largely on roads funded by the Federal government.
  • The Internet is still in it’s infancy. There are a lot of startup companies that are providing good products that are not widely available, that are operating on a shoestring. When they have to start administering taxes for 50 states, filing 50 sales tax returns and writing 50 checks each month, the administrative costs will kill them.
  • The point above assumes that only state taxes will apply. What happens in cases like Pennsylvania where the city government of Philadelphia gets and additional 1% because the city leaders are too incompetent to make ends meet even though Philly has one of the highest wage taxes in the country? Now, e-tailers will have to file thousands of returns each month. Oh, by the way, for those of you who have never collected sales tax, different items are taxable depending on the state where you are collecting the tax. The logistics of keeping up with this will be a nightmare. Most of the shopping carts currently available are a long way from being able to track the necessary data and do the required calculations.

The way this will work is that New York will pass the law. As the legislator’s greed grows, they will start going after the smaller e-tailers. The NY Attorney General, like Eliot”I’m a F—-ing Steamroller” Spitzer will single out a couple of e-tailers based in neighboring states and subpoena or indict them for failure to collect the tax. Stick a couple of heads on pikes at the city gates and you start to have compliance.

What can you do about it.

  • At some point, someone will need to form an association of online retailers that will lobby at the state and federal level to protect e-tailers from absurdity (ie filing a couple of thousand state and local tax returns each month)
  • Remind the folks in New York that one of the reasons the government is trying to tax Internet sales is that New Yorkers have consistently elected corrupt tax-and-spend-spend-spend legislators.
  • Call your federal representative and senators and ask them to do what they can to prevent the states from creating a byzantine labyrinth of regulations for e-tailers.
  • If you live in New York, call your state reps and blast them.

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