Sales tax coming for online purchases

It's a statement - not a question

[farmboy]

The U.S. Supreme Court previously ruled that a retailer only needed to collect sales taxes in those states where the seller had a physical presence. The physical presence would be something like a brick & mortar store, a distribution warehouse or a salesman.

The same applied to online retailers.

The state of New York has decided that an affiliate is basically a salesman for a retailer. Since Amazon has affiliates in New York, Amazon has a physical presence there and must start collecting sales tax on Amazon purchases from New Yorkers, effective immediately.

This will be applied to other retailers and is expected to generate tens of millions in revenue for the state each year.

Based on the articles I've read, some online retailers with a not too successful affiliate program may just decide to drop the program.

Some seem to think the reasoning by the State of New York won't hold up when challenged in court. Others think this will spread to other states soon.

One thing I haven't read and I've always been curious about is how online sales of downloaded digital products would be affected.

FarmBoy

[LifeinAsia]

I don't see how this would stand up to a challenge. Most affiliate agreements state that the affiliates are independent contractors of the company or other such wording that should (hopefully) help strike this down. It sounds to me like another new idea-challenged judge who doesn't understand the concept of affiliate marketing. Just my thoughts.

[farmboy]

Most affiliate agreements state that the affiliates are independent contractors of the company...

Evidently the State of New York considers a salesman who is either an independent contractor or an employee will meet the criteria.

...It sounds to me like another new idea-challenged judge who doesn't understand the concept of affiliate marketing....

As far as I know, this plan by the State of New York hasn't been before a judge.

If you are referring to the Supreme Court decision, that predates affiliate marketing.

FarmBoy

[syber]

Governor Spitzer has backed off from treating affiliates as sales reps:

[nysun.com ]

[farmboy]

Governor Spitzer has backed off from treating affiliates as sales reps:

I was just coming over here to post an update and it looks like you beat me to it.

Although it looks like it's just being delayed, not dropped.

I wouldn't be surprised if he returns to this online tax idea soon. Politicians don't usually back off two things in two days without having an "end around" play in the book.

FarmBoy

[Beagle]

One thing I haven't read and I've always been curious about is how online sales of downloaded digital products would be affected.

Right now that depends on the state. My state has a combination of what they call "sales and use" taxes - some things are taxed on sale and some things on use. I think you'd have to be a tax attorney to sort it all out. The one positive thing to come out of this confusion is that the only downloadable products that the state taxes are software. The way the law is written, they can charge sales tax only on tangible goods. Downloadable software is supposed to have a use tax connected to it. But anything else that's not tangible goods falls through the cracks - as of a couple of months ago, anyway - I hope none of our legislators are reading this ;) . This is all stated in a remarkably clear way on the State Revenue Dept's website; the downloadable goods question is probably clearer than most other areas.

But if someone who lives in a state that does charge sales tax on downloadable goods downloads something other than software from my site...?

[vincevincevince]

When you buy a set of e-books 'worth $5000' for $100; will you be hit for taxes on the $5000 which the retailer assures us is the true value or the $100 which we pay due to his extraordinary generosity and heartfelt wish to see us succeed?

I have some websites which use Adsense. Visitors to my websites pay for the content on them by virtue of some of them clicking on Adsense advertisments. Are they not making a digital download of that content to their computer, and (on average) making payment for that download, but not paying sales or use tax?

[Beagle]

If I buy a $2.00 pen on sale for $1.50, I pay sales tax only on the $1.50, so the actual value of something shouldn't be an issue. There are some special offers (usually things like "$20 off if you buy $100 or more") where it's stipulated that the buyer pays all taxes, but that's different from a specific item being marked down.

With Adsense, you're running an ad, not selling the product. Making you responsible for the sales tax would be like making a newspaper collect sales tax from anyone who goes out and buys something because of an ad they saw in the paper. If there's any sales tax involved, it would affect the site selling the product.