A Look at NY's Internet Sales Tax Provision -- And How It Affects Indies in Other States

April 17, 2008

Last week, independent retailers in New York State scored a huge victory when the legislature passed a final budget that includes the Internet Sales Tax provision. While Gov. David Paterson is expected to sign the budget bill into law without any line-item vetoes, as of press time, he had yet to do so. Meanwhile, though experts expect there to be a legal challenge to the provision from the likes of Amazon.com or the Direct Marketing Association, no suit has been filed in court. So, as New York State awaits Gov. Paterson's signature on the budget, Bookselling This Week is taking the opportunity to address some of the questions that independent booksellers in other states might have regarding how the provision will, or won't, affect their business activities in New York.

"Since 1999, the very start of our nationwide fight for e-fairness, this campaign has been about leveling the playing field for Main Street bookstores, who have had to contend with out-of-state online retailers that have skirted sales tax laws by offering consumers tax-free shopping," said Oren Teicher, ABA COO. "The Internet Sales Tax provision ensures that government is not favoring one retailer over another and that New York-based independent booksellers are enjoying a level playing field."

For those booksellers who question if the provision means they now have to collect and remit sales tax to New York State, it is important to know that the Internet sales tax provision as adopted by the New York State legislature is a clarification of the definition of nexus that takes into account the advent of online affiliate marketing. As such, the provision applies only to those remote retailers who have a presence, or nexus -- via office, warehouse, sales agent, or online affiliate -- in New York State. Any independent bookstore that does not have a nexus in the state is not required to collect and remit sales tax for sales made to New York residents.

For those bookstores that do have nexus in the state, the provision states that out-of-state sellers are required to collect and remit New York State sales tax if "the cumulative gross receipts from sales by the [out-of-state seller] to customers in the [New York] state -- who are referred to the seller by all [New York] residents with this type of an agreement with the seller [e.g. online affiliates located in New York State] -- is in excess of $10,000." This means the provision only applies to non-New York State retailers that have $10,000 or more per year in affiliate sales, assuming they do not have nexus in the state through other means (e.g., a warehouse or office).

Independent bookstores that have a BookSense.com website do have nexus in New York, and they already collect sales tax for orders from customers in New York State.

With the budget passed, ABA is now urging New York booksellers and other independent retailers to thank their legislators for including the Internet Sales Tax provision in the final budget. ABA has created a templated, suggested "Thank You" letter to an assembly member and to a senator. "This is a precedent-setting move on the part of New York State, so it is important to thank your legislature for its leadership and support of this key issue," said Teicher.

Booksellers can find their assembly member here and find their senator here.

Topics: Sales Tax Initiative, Internet Commerce,