Don't you see the nasty place that this will go if states (or the US government, or the UN) are allowed to tax transactions? Imagine having to keep track of worldwide sales taxes for every taxation district.

While this may not be a "new" tax, it certainly is newly enforced. I think there are enough taxes already, thank you.

While the tax may not be new in principle, the methods used to collect it certainly are. They represent a new thrust by the "sinister bureaucrats" to use internet retailers to make up for their own inability to collect the tax with their own (outdated) devices.

It is not the responsibility of the people to support the government. Rather it is the responsibility of the government to protect the rights and freedoms of the people. Instead, however, the people who administer our government seem content to entrench themselves in office and grab as much power and graft as they can.

Read the constitution! Vote the bums out!!!!!

This may not be a new tax; sales tax. But it is a new claim on cyberspace as "territory for taxation". Do states have the right to tax the users of cyberspace? Add international trade into the equation and which country gets to claim the taxes? More important who pays for the cost of enforcement?

New York's stance has already killed manufacturing in the state for years, hence why it is essentially a retail and services state with little real growth value to the manufacturing GDP of the nation.

This latest attempt of trying to get a secure tax revenue base will only force the offshore of e-Commerce. Sadly, New York's short-sightedness will push investment in New York state even further away, yielding even less tax revenue.

History has shown time and again, the most prosperous nations and the most fund tax coffers are those that tax the least. Don't believe me, ask Ireland, Hong Kong and Dubai. It is a lesson New York has not learned.

"The more you tighten your grip, the more systems will slip through your fingers" - Princess Leia

Sounds like the author supports this commie ruled states that do whatever they can to drive any kind of business out of them and then drop crocodile tears about 'lost revenue'.
Watch it. But then don't make stink - you people elected this malcontent, so pay the price.

Kenneth, you are conflating 2 stories here. It is true products sold online are subject to use taxes in many states where the retailer doesn't have a nexus and the state can therefore not collect sales tax. The sale is generally legally defined to occur on delivery of the product in the state of the consumer.

The real issues, and Amazon's bone of contention, are what are the terms of the sale, and what makes a presence in the state that obligates them to collect sales tax and not use tax. To clarify, a customer in Texas could be referred to a retailer in California by an affiliate in New York. The retailer in California can not collect sales tax for Texas. Texas can not oblige the retailer in California to collect use tax, but it can oblige it's resident to remit it to Texas. Under what guise could New York oblige the retailer to collect tax? The consumer wasn't in New York for New York to oblige the retailer to collect sales tax, or for New York to oblige the consumer to remit use tax.

The issue is 2 fold. First New York is trying to redefine a physical presence in the state for it to be able to oblige a company to collect sales tax. It is also trying to redefine the legal completion of the sale to be at the point the retailer sells the product rather than the point the consumer receives the product, so it can collect sales tax on a sale that currently legally did not occur in New York, from a company that currently doesn't have a physical presence in New York.

There are issues of enforceability around how New York could compel Amazon when it doesn't have property or people in the state. Could the state really hold the affiliate's property at ransom to compel action from Amazon? And if so, would a judge uphold the state appropriation of an affiliate's property to compel Amazon's action. A more clean solution would be for New York to require affiliates in its state to remit an intermediary tax on products where it acts as a salesman between parties outside the state. But that would be politically messy and inconvenient. Amazon was an easy target for state bureaucrats.

While I enjoy the loophole, I guess fair is fair. NOT! Bring the fight Amazon!

An obvious legal angle for Amazon would be "double taxation". North Carolina already collects tax for online sales. When you file your NC tax form, you must either estimate the amount of tax you should have paid (and have receipts to prove it), or pay a flat percentage of taxable income. Some retentive types might keep the necessary receipts, but no one I know does. The law makes the unfair assumption that everyone in NC is ripping off the state by shopping online.

Why not support and reward those states without a sales tax? You would be welcome to set up either an affiliate or a physical presence and bring jobs to those states.

There's the Constitutional issue: states may not have any sort of tariff for importing goods from other states, and the Federal government has sole authority over interstate commerce.

There's the practical issue: Amazon would find it very onerous to collect all sales taxes in fifty states and thousands of counties, cities, and districts with their own rates and rules. This requirement would wipe out a tremendous number of small ecommerce and mail-order sites, which collectively represent a lot of economic activity (and which is essentially the only way for me to buy some hobby supplies).

There's the question of what this does for contracting relationships, since by any reasonable definition an affiliate is a contractual partner rather than an employee. Is a company liable to collect taxes for every entity it has a contractual partner in?

Overall, it looks like a potentially disastrous idea for the economy, a tremendous change in legal practice, and unconstitutional. Just what I expect now and then from my elected officials.

Nice article, but I wanted to bring up a slightly inaccurate statement you made. You touted amazon.com as the largest retailer on the Web when in reality, it's not. To the best of my knowledge, Amazon.com sells about 11 million products or thereabouts, whereas marketamerica.com/chadandmandy has about 35 million products or so for sale. Amazon is no longer the largest retailer online, albeit they are well known.

Thanks

Everyone is right... politicians are all in for the power and for a lack of creativity on how to generate tax revenue, they have to go for the easy prey like internet transactions.

As it is already, the medium in which transactions are being performed, is already being taxed. But that's beside the point. I am no lawyer but it would seam totally unfair to the internet shopper to pay any state tax, when you are just purchasing something that it is not at a store and not being there in person. Period.

Instead of taxation at the state level anywhere, why not implement a fair internet tax of let's say 1/2 a percent per transaction Not to increase for the next 25 years and the increase would be 1/4 of a percent not to exceed 2% forever.

It would be a small enough number to add to your transaction and it wouldn't discurage me from making a purchase.

I love to shop at Amazon and will continue to do so. If the governement get's too stupid, it will screw up everyone's online businesses.

The Fed collecting the sales tax would certainly even the playing field for most retailers but I would think many larger ones would move to one of the no sales tax states for a competitive advantage.

The reality is that taxes are needed. As much as we may hate paying them, we all use the services they pay for. Most don't even realize it.

It is unfair to force companies present in the state to collect taxes, but those who evade and avoid a presense to not collect taxes for the same goods delivered to residents of that state.

I think it is only an excuse to assume a commercial company cannot calculate and charge taxes for 50 states. Many manu many companies do this already. almost all software packages already handle it. It is not that hard.

As a compromise, perhaps States should be required to add a web service to compute the tax. This would be easy enough for any virtual business to access. require a sic code, state code and amount of product, or labor.

We are not thinking clearly to feel taxes are wrong, evil, etc. Of course, I despise paying them when they are used unwisely or corruptly, but I realize there are a lot of real benefits I enjoy. The fault is not with taxes, and the cure is not with removing them and letting those corrupt politicians borrow the money instead.

While the debate on this issue enjoys excellent, thoughtful contributions from many, it appears that the entire debate is lost in a blizzard of details and thus, does not address the larger, far more important issues regarding the entire subject of morally sound tax collection policy. In short, Americans nationwide are afflicted by increasingly aggressive and morally reprehensible tax collection methods at ALL levels of government!

State governments (or any government) that collects taxes in ANY manner that requires government apparachiks to know who owns or earns what, pose the single most grave and destructive threat to life, liberty and property for all Americans. Some of the states that have glommed onto eCommerce as a means of confiscating even more revenue to waste ALSO collect taxes based on individual wealth (income, property, capital gains and estates (death) taxes). No government on Earth can be trusted with the kind of information about individuals that these types of taxing schemes require, because having such information empowers politiicians to incite and fan the flames of class warfare, for political gain! As if that is not enough of a crime, many of those states ALSO inflict taxes based on sales. Since sales taxes are generally collected without the state needing to know anything about the individual who paid them, (and thus, are applied without regard for class) then by definition, they are morally superior to taxes based on individual wealth.

Bottom line: it's very hard to feel any sympathy whatsoever for any government at any level that has the unspeakble arrogance to even suggest that they should pay for ANY government "service" (legitimate or not) using BOTH forms of taxation! To the degree that Amazon can resist, encumber, block or evade collection of sales taxes in those states that also impose taxes on individual wealth, they should be regarded as folk heros by any decent, thinking individual.

Just don't cry foul when all the e-commerce sites move off-shore.

People still wonder why business is going off-shore?

I think it would be better for all states to charge the same amount of sales tax; then all retailers would collect the tax and split it between the state the seller is in and the state the buyer is in. This would preclude, however, other local governments (city/county) from also charging a sales tax. I'm not sure how to handle international sales with this model, possibly half-tax?

The states want more money. They have laws requiring everyone to pay use tax for everything they buy online. People ignore the law. If the states started prosecuting people for ignoring this law, then there would be a huge backlash and lawmakers would be voted out of office.
Whereas if they go after Amazon, which does not get to vote in these states, then the lawmakers don't have to worry about their jobs.

Define online business. Is it where the owner lives, or where a delivery warehouse exists, or where a web hosting company has a physical web server? What if the delivery warehouse is a separate facility/company such as those that are colocated with Fedex like facilities? Or is the tax (if any) based upon the delivery location.

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In the previous example involving New York, why should they get any tax review if the product is not delivered to a New York resident or business, or shipped from a New York licensed business?

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Are we entering a time in which you will get taxed multiple times depending on where all of the intermediaries are located? And just how would that system be made to work or be monitored for abuse...

In reply to fairisfair:

I think the general opposition isn't the fact that we have to pay taxes, it's that the taxes are so ill-defined, spread out, double and triple dipped with no end in sight to the continuous increases and shifts.

Sure, a government needs money to operate, but you tally up Federal tax, state tax, excise tax, use tax, sales tax, gas tax, cable tax, county tax, local tax, property tax, utility tax, luxury tax, car registration tax, emmisions tax, stamp tax, medicare/social security tax, self-employment tax, I'm-making-more-money-than-someone-else tax, etc... It's easy to see how people can be fed up with yet another tax. Most middle class people are paying the government the equivelent of buying a new car each year. Meanwhile, our governement officials earmark billions of our hard earned cash for bailouts, pet projects, medical services inflation (read: Medicare / Medicaid), and pork.

It's enough to make anyone crazy. I don't believe the American people can take much more of this.

I think its easier to buy items from amazon w/o having to keep track which items have tax added in already and which you have to pay the use tax on come tax season. It'd be nice if the online companies would automate all of that for us.

There was also a op-ed article on this subject in the LA Times today.

Being so close to our nation's birthday, we should take a reminder of why we declared independence in the first place; taxation without representation.

Amazon is not "represented" in these states, it does not vote in those states, it does not have people in the states voicing Amazon's concerns to the local government. If they are not duly represented, it is unconstitutional to tax them.