Is it Fair to Charge New Yorkers Sales Tax for Online Purchases?
The ability to make purchases online without paying state sales tax is something that online merchants and customers alike have grown to love. For many years, this sales tax exemption was considered a win-win proposition for everyone. States and municipalities were more than happy to grant the sales tax exemptions to online merchants to encourage new business and job growth. Buyers were more than happy to save some money as well, especially as they began to discover that buying online was as safe and secure as any other type of transaction.
As the economy began to deteriorate, some states began to change their opinion on taxing online sales. These states were strapped for cash and needed to find new revenue any way they could. As traditional “brick and mortar” business began to migrate online, these states found that they were losing a once reliable source of revenue. Instead of granting tax exemption to encourage online businesses to locate within their states, they now wanted to tax these businesses as well, to regain the revenue they were losing from traditional retailers.
New York State Leading the Charge?
New York State seems to be leading the movement to charge sales tax on online sales. Currently, New York is one of only two states where popular online retailer Blue Nile charges sales tax to New York residents. Online giants like Amazon and Overstock are also required to now charge state sales tax to New York residents.
Unhappy with the new regulations, Amazon and Overstock challenged the state law and on March 27, the New York State Supreme Court rejected their challenge, affirming the state’s right to collect sales tax from any online business that had a “nexus” or a physical presence in the state.
An Unresolved Issue
Overstock has said that it is considering appealing the ruling all the way to the Supreme Court. They are also thinking about getting the U.S. Congress involved. “This is a fairness question which the Congress alone must resolve,” says acting Overstock CEO Jonathan Johnson in a prepared statement. “There are more than 9,600 taxing districts in the country, and if Congress moves that enormous tax collection burden to remote retailers, then in fairness, Congress should require states to pay reasonable compensation to those retailers for the associated costs.”
This issue is not over yet. As more and more states are faced with budgetary shortfalls, they are increasingly turning to the world of online retail as a potential source of revenue. This is not a popular move with customers and even with some jurists. In 2012, an Illinois court struck down the state’s online sales tax law, ruling that the law violated the Commerce Clause of the U.S. Constitution.
One thing is certain. Online sales will continue to grow in popularity and state governments will continue to need revenue. It is unclear at this point how this issue will be resolved in a way that is fair to everybody. At least one retailer, Overstock, says that they are willing to accept an “appropriate” federal solution to the issue.
About Gevril Group
Gevril Group is the exclusive US representative for select European watch brands, distributing and servicing luxury, fashion and sports timepieces at a wide range of price points. Gevril Group also operates a full-service watch repair department staffed by master Swiss watchmakers.
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