Internet giants and small business organizations are rallying against New York Gov. Andrew Cuomo’s proposal that would impose a sales tax on online marketplace providers when they sell to New York residents.

Dubbed the “Amazon tax,” the proposed tax requires online marketplaces that process at least $100 million in sales a year — like Amazon or eBay — to collect sales tax on behalf of the vendors who sell to New York residents using the website. Currently, they must only collect tax when the vendor and seller are located in the same state.

The proposed tax is “a gigantic departure from the way that sales tax laws work,” said Ken Pokalsky, vice president of government affairs at The Business Council of New York State.

Traditionally, sales tax is reserved for brick and mortar stores like storefronts or distribution centers, Pokalsky said. State sales tax was collected from businesses located within New York, but now that responsibility falls to online marketplace providers that don’t have a physical presence in the state, Pokalsky said.

BCNYS opposes the proposed tax, Pokalsky said. The organization believes a sales tax overhaul should be handled on the national level, rather than state by state.

“What this proposal would do is tax the exchange itself, regardless of where the goods were coming from or located. And in the interest of fairness and competitiveness, we believe this is something that should be addressed on the federal level, not the state level,” said Zack Hutchins, director of communications for BCNYS and a Syracuse University alumnus.

Pokalsky described it as bad tax policy, saying the impact places an administrative burden on the companies facilitating sales rather than giving tax responsibility to individual vendors or the state.

The tax is designed to raise tax revenues in the state. Currently, New York state tax returns ask residents to claim any purchases they’ve made out of state, to charge tax on those purchases at the New York rate, but many do not disclose those purchases, Polasky said.

“It makes their lives easier. Rather than waiting for 9 million taxpayers to be forthright and send them the money they technically legally owe, they’ve got a couple of major online vendors and just ‘Make them do it for me,’ in a way that no other state does. And really — under the concepts of sales tax law — they have no legal obligation to do that,” Pokalsky said.

The state hopes to raise approximately $68 million in tax revenues in the 2018 fiscal year, according to Bloomberg.

Another concern raised about the tax is the steps other states may take if the tax proposal passes in New York. Pokalsky said different tax laws similar to the Amazon tax could make selling across state lines more difficult. He said every state having different internet sales tax laws would be a burden on vendors and marketplaces.

Internet Association, an internet trade association representing sites like Google, Amazon and eBay, opposes the proposed tax for “forcing companies that do not buy or sell anything to become agents of the state charged with collecting and paying sales tax,” according to a Crain’s New York Business article.

Retailer eBay also sent an email to its New York customers, urging them to contact their legislators and “eliminate harmful tax burdens for small businesses and consumers.”

The “Amazon tax” has been on the table before but has never made it past the state legislature, said Deb Warner, vice president of public policy and government relations at CenterState Corporation for Economic Opportunity.

Warner said the tax proposal is in neither the state Senate nor the Assembly’s budget proposals and only falls in the governor’s budget proposal for fiscal year 2018.

CenterState CEO will not take a position on the tax, Warner said.

Pokalsky said he does not believe the tax proposal will pass through the state legislature.

“The tax laws don’t reflect the way the economy works today in terms of sales,” Pokalsky said.

Published on March 21, 2017 at 11:17 pm

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