2010 LEGISLATIVE AGENDA

Sales Tax on Internet Purchases

Retail Council position

We continue to acknowledge the inevitable -- that it is unlikely that New York State will implement the Streamlined Sales Tax Agreement (SSTA) -- the national, cooperative effort by state and local governments to simplify the thousands of sales and use tax systems in place throughout the nation. That hurdle notwithstanding, the Retail Council acknowledges New York State’s innovative leadership vis-à-vis the definition of “nexus” for the purpose of requiring the collection of sales and use taxes on purchases made via the Internet and other remote channels. We do, however, caution New York and other states against overexpansion of nexus beyond consideration of sales tax collection on retail sales.

Legislative action

The Retail Council actively supported provisions enacted in the FY 2008-2009 budget that expanded nexus to include the use of in-state affiliates by retailers otherwise located out of state. In a January 2009 court victory for the budget provision, the New York Supreme Court, New York County, upheld the law, ruling that Amazon.com’s use of and payment to in-state affiliates creates sufficient substantial nexus for sales tax collection purposes (Amazon.com LLC et al. vs. New York State Department of Taxation and Finance). Appeals pend.

The FY 2009-2010 budget expanded this existing law by requiring Internet companies to collect and remit sales tax if an in-state affiliate uses trademarks, trade names or service marks in New York state.

At a glance

  • The Retail Council of New York State remains strongly supportive of the national Streamlined Sales Tax Agreement (SSTA) and continues to urge New York State to reconsider its long-standing entrenched opposition to adoption of same.

  • More than 1,000 retailers have registered with the Streamlined Sales Tax Governing Board and are collecting sales taxes on items shipped to states that are part of the agreement. The Governing Board currently is urging the United States Congress to allow the participating states to force businesses to collect taxes on sales made to customers in state, even if the businesses have no physical presence (“nexus”) there. 

  • The weak economy is motivating other states to join the growing cast of participating states, including New Jersey, Michigan, and North Carolina; Texas, Florida, and Illinois all have introduced legislation in 2009 that would render them eligible to join.
     
  • The New York City Independent Budget Office (IBO) reported in August 2008 that the “rapid growth of e-commerce -- online retail sales and electronic services -- is making many state and local officials concerned about the erosion of an important part of their tax base,” estimating that from July 1, 2006 through June 30, 2007, more than $50 million of combined state and local taxes on Internet sales generated by New York City consumers “went uncollected, including $29 million in lost city revenue.”  (Source: “E-Commerce: Eroding City’s Sales Tax Revenue,” IBO Fiscal Brief, August 2008).
  • Supporting a fair, consistent, and sustainable tax treatment of consumer goods supports brick-and-mortar merchants of all size throughout the state.