Sales Tax Parity for Internet Sales

Retail Council position

Support complete implementation of parity law that treats all retailers - Internet-based, remote, and brick-and-mortar - in the same fashion regarding the responsibility to charge, collect, and remit the sales tax of any state in which they make a sale.  Parity is achievable through simplification and streamlining of the process by which New York requires collection and remitting of sales tax.

Legislative action

The 2003-2004 State Budget enacted language bringing New York State to the table as a participating state in the creation of a national streamlined sales tax agreement (SSTA).

Current sales tax law - particularly related to the state’s treatment of sales tax on clothing and footwear costing up to $110 per item - precludes SSTA application in New York State.  By allowing long-delayed and oft-debated budget language to become effective in April 2006, the legislature made ‘permanent’ an everyday exemption from New York’s 4% sales tax for clothing and footwear costing up to $110 per item.  (This in lieu of two separate one-week sales tax ‘holidays’ that had been the norm over the previous several years.)  Included in this law is the option for local government participation in the everyday sales tax exemption.  According to the state’s Department of Taxation and Finance, only 14 local jurisdictions offer the sales tax exemption.

At a glance

• The ‘Streamlined Sales Tax Agreement’ (SSTA) presents a cooperative effort by state and local governments to simplify the sales and use tax systems in place throughout the nation.  To ensure that all businesses and consumers are treated equally - and that New York’s state and local governments are properly aligned to collect billions in sales tax revenue which they currently may not collect - New York State must participate fully and cooperatively in this important restructuring of its existing system.
• Key components of the SSTA - long accepted by some 40 states prior to New York’s entry into Agreement implementation discussions - allow local governments to establish and maintain sales tax rates that differ from the rate established by the state.  These agreements, however, require the local sales tax base to mirror that of the state.
• New York State’s treatment of the sales tax on clothing and footwear deviates from this fundamental component of the SSTA.  Whenever New York has provided for sales tax-free shopping for clothing and footwear - either on a ‘permanent’ basis or during specific tax holiday periods - the law has allowed local jurisdictions to choose whether or not they participate.  This critical disparity currently separates New York from full compliance with the SSTA and must be corrected.
• The Retail Council supports provision of two separate one-week periods during which state and local governments would remove their sales tax on clothing and footwear costing up to $500 per item.  New York State would hold local governments harmless for local sales tax revenue forfeited during these two one-week periods.
• Consumers respond positively to the tax-free holidays - provided they are entirely ‘tax-free’ (i.e., free from state and local sales taxes).
• Under these terms, New York would be closer to complete compliance with the SSTA and therefore be in place to begin to collect sales tax revenue on purchases made through remote channels (i.e., Internet-based, mail-order, and other merchants not located in New York State but selling products to consumers in New York State).