New York Internet shoppers - Beware; the tax man cometh

According to the media, the State of New York is in the process of requiring Amazon to collect sales tax on all sales sourced from New York residents, and remitting those taxes to the State. If the buyer lives in New York City, City taxes also will be attached to Amazon sales. That would add up to a surcharge of more than 10% on every purchase a NewYorker makes from Amazon.

I'm not a lawyer but I know a little something about WHY you don't pay sales tax when you but from an internet merchant who does not have a "nexus" in your home state. (Nexus is a fancy word for a presence or connection.)

Something called the Interstate Commerce Clause says that individual states can not interfere with trade between the states. In a court case called "Bellas Hess", the Federal courts decided that states could not require catalog merchants who did not have offices in, or a connection to, a State to collect taxes on behalf of that State.

Take our gallery, Aboriginals, and Florida as an example. If you live in Florida and you buy from us, we must, as a Florida company, collect 6% sales tax from you and forward it to the State tax collector. But if you don't live in Florida, we can't be required to charge you the sales tax for the State you live in.

To require us to do so would put your state right between us and you, a violation of the Interstate Commerce clause.

A disinterested party, that is, one who isn't paying the tax, might ask, "why is that so bad?" Well, there are 50 different states. If we, or any other internet merchant, had to calculate, collect and forward different State taxes for all of them, and for every taxing jurisdiction within them, we would not be able to stay in business.

The losers would be our customers, you, and the people who rely on us to pay our tax, based on our income.

What does all this mean to you?

If you live in New York, make sure to check the tax collection status and policy of whoever you are buying from. Make that a consideration about doing business with them. If you decide to buy anyway, order now, before the tax starts being collected.

If you live in any other state, check if the merchant you are dealing with has a "nexus" in your State and what their tax collecting policy is. And lobby your State government not to follow New York's lead.

On the good news side, many legal authorities believe that New York State doesn't have a prayer of winning if this goes to the Supreme Court as a Constitutional challenge.

Stay tuned. You are the one that pays this tax.