Internet Tax is Back and Threatens Affiliate Programs

Internet taxes: If you do any business on the Internet you better hope…

From the NY Times blog today: Let the Tax Collection Begin

“The state (NY) now says tax must be collected by any online store that gets customers referred to them by Web sites based in the state. In late April, Amazon filed suit challenging the state law. And on Friday, Overstock.com filed a related suit. Overstock, has stopped doing business with its affiliates in New York and so it will not collect sales tax for now.”

Now I read the NY Times everyday and I have followed the Internet Tax thing pretty well. But I missed something along the way where NY started collecting taxes from and I quote: “any online store that gets customers referred to them by Web sites based in the state”

UPDATE: I just found this write up on the NY tax code so I added it here. CLOSE UPDATE:

We all better hope this gets struck down and other States don’t try to follow suit. This could destroy entire affiliate programs everywhere. The states are all in trouble. I live in Arizona and the bunch of idiots running this state are desperate for any money they can get their hands on.

Arizona recently set a state prosecutors mandate to prosecute every felony to the full extent of the law. Full extent means more years in prison. This is not to make our states safer for law abiding bloggers like myself. This is because the federal government kicks in $40,000 to the state for every inmate incarcerated by the state itself, per year. Then the lovely state of Arizona sells the inmates to private prisons in other states for less than the federal government pays per inmate. I wonder if the states collect taxes on inmates sold to other states?

My point is this:

If the state of Arizona would rather incarcerate their own citizens for profit, don’t you think they will jump on Internet taxation if it is not struck down in New York?

Don’t you think that all the other states will follow suit if New York gets away with it?

Don’t you think Americans will begin buying goods from Canada and Mexico rather than pay the tax?

I myself will not buy anything from a company that collects the New York tax. I urge you to do the same.

From the “I love Arizona” department @ Chris Lang

12 Comments

  1. Posted June 3, 2008 at 6:22 am | Permalink

    I myself will not buy anything from a company that collects the New York tax. I urge you to do the same.

    Even from companies based in NY? And if the order isn’t going to NY, you won’t be paying NY state sales tax.
    Yes, I’m a NYS based affiliate and many programs have dropped me. What did I do? Switch to their competitors. I just have a momentary hassle, but they on the other hand are losing sales.

  2. Posted June 3, 2008 at 6:32 am | Permalink

    Kirk, good point!

    But maybe I did not make my point strongly enough.

    The problem lies in each state wanting to tax the anybody they can.

    So they will write things into each of their own laws that create a complete mess as far as doing business on the internet.

    Pay attention to the part that reads like this:

    “The state now says tax must be collected by any online store that gets customers referred to them by Web sites based in the state.”

    That is what is dangerous about state laws, each one is different. How am I as a business owner going to keep track of all 50 states own little laws?

    Now lets say that each state does tax the sale.

    Now all states will want to tax sales.

    Not just where the business is registered, the state the sale occurred in.

    So I will have to pay tax when I buy something to the state of Arizona (I live there) and the state that the website business in registered in.

    At this point I am, as a buyer paying double taxes.

    8% to the state of Arizona and what ever it is in the state where the business name of the site is registered. Just for simplicity lets say it is 8% like AZ.

    Now I am paying 16% sales tax.

    But wait, I found this site thru Google, and they are in California.

    So now I owe the state of California sales tax too.

    Use your heads people this is the end of all Internet sales. I as a web site owner would simply move my site and business to a Mexico server, see ya internet taxes and who would ever buy anything from a US website again?

    By the way, this blog will be written on the beach in Mexico soon….

  3. Posted June 3, 2008 at 7:20 am | Permalink

    Hello chris,
    Yes the sales tax idea is bad, but I think what my prove to be even worse is the new bill introduced in the Senate with the power
    to change anything that is not wanted by those in power, total control over all citizens of the USA.

    This could give some NGO control of all Internet activity, so as to a sales tax… the sales tax may well take a back seat, with total control of what can and can’t be done on the Internet may well be our first concern.

    Ed Eismon
    PS: This Senate bill will be introduces this June 3rd week. Look for it!

  4. Posted June 3, 2008 at 7:33 am | Permalink

    Thanks for the heads up Ed,

    Be sure to send me a link or post it here when you have more information.

  5. Posted June 3, 2008 at 7:55 am | Permalink

    As a website owner – how would I even know where a referring site is from? As for Google – They just built a huge new facility in The Dalles Oregon (no sales tax in Oregon). I do not know how many servers are in that facility but I am sure the number is high. This would be way to confusing for me!

  6. Posted June 3, 2008 at 8:03 am | Permalink

    Dotty, that is my point exactly. Every state with their own taxation laws would make such a tangled web of the Internet for the little marketer we would spend all our time on admin and never get to what we do, marketing our own products.

    I am currently able to file my own taxes and handle my own accounting. I would have to hire an accountant and start charging double for my eBooks to cover the expense.

  7. Posted June 3, 2008 at 10:01 am | Permalink

    If I operated a business here in Arizona, I have to add an Arizona Transaction Privilege Tax (sales) of 6.3% to the products I sell. There may be exemptions to this, for example in some places in Arizona there is no tax on food or prescription drugs. The law makes no distinction between an Internet Business, like Ebay, or a business which is non-internet.

    Now there may be another thing to consider here, even though you technically have to have a business license for your business in all states… the state, county and city entities may not want you to jam up their offices with a business license request just because you sell a couple hundred dollars worth of E-books or make a few hundred dollars a year cutting grass. I can remember in Nevada being told to not even consider yourself a real business unless you made $1,000 or $3,000 a year. Things like that may apply here as well.

    So, in effect we are already paying taxes on what we sell on the net… or we should be. Just like in the real world, not all who should pay taxes do pay taxes. I’d fight any specific internet tax simply on the hasis that taxes are already being paid on what we may sell. To add an Internet Tax is simply double taxing.

  8. Posted June 3, 2008 at 10:19 am | Permalink

    John, here in AZ it takes a $17.50 business license from the state to get a DBA (doing business as) account at the local bank. This allows you to get a merchant account and accept credit cards and get the payment the next day in you DBA account.

    No merchant account underwriters will consider you without a DBA account. The state license also puts your business name in your name and no one else can touch it in the state of Arizona.

    As far as the federal level you need to call the IRS and get a tax free number and a federal tax ID for your business. That also puts your business name in your hands and no one else can do business at the federal level under that name. This is not to be confused with Trademarks or Copyrights and I am not the person to advise you on that.

  9. Posted June 3, 2008 at 1:34 pm | Permalink

    Where you all go wrong is the assumption you have to bow to these corp entities, aka govts. They can make all the claims they want, enforcing them is another matter, and in most cases they have no jurisdiction anyway, so quit getting your panties in a bunch. They will have little time to mess with small fries, and certainly do not posses the tech savvy to be of much effect either. Run your stuff off shore, let them chase you, they dont have the money, and as things go they will fade, the game is over for them, it will go out in one last gasp. If we all dont have money, they don’t either. Realize what is going on, its the endings of the empire, once the money blows up, it wont matter.

  10. Posted June 5, 2008 at 7:59 pm | Permalink

    “…What did I do? Switch to their competitors. I just have a momentary hassle, but they on the other hand are losing sales…”

    @Kirk – While this may solve the problem for you in the short term, I believe it ignores the proverbial “elephant in the room” of an ever more intrusive, coercive government. If we merely adjust our tactics to go around the obstacle, sooner or later, it will become far to large to avoid.

    “…as things go they will fade, the game is over for them, it will go out in one last gasp. If we all dont have money, they don’t either. Realize what is going on, its the endings of the empire, once the money blows up, it wont matter.”

    @Steve – Moving your business offshore is a valid solution, and one which grows ever more attractive as November looms closer.

    I believe that ultimately, the empire WILL fade, and it will come about as a result of our worthless fiat currency that has been debased to such a degree that I’ve moved my liquid holdings into Parker Brothers yellowbacks.

    However, I tend to think that this is not an event for which our political and economic masters are unprepared.

    But hey, I could be way off, …and whichever one of the three stooges gets elected may take up the herculean struggle to reduce spending, reduce waste, reduce taxes, reduce the size of government, restore the free market, and put us on a 100% reserve gold standard, all in an effort to restore Republic.

  11. Posted June 7, 2008 at 9:18 am | Permalink

    Hello Chris,
    Great post, I am from N.Y. and I have to say it is going to hell in a hand basket quickly.
    Not only have they imposed the tax on the internet, but they have raised cigarette tax by $1.25 a pack,gas is almost $4.50 a gallon and living in Rochester we have one of the highest unemployment rates in the country.
    I say it is high time this politicians stop getting away with there $1400 dollar lunches and take a pay cut. If the money was coming out of their pocket they would have a different outlook.
    Let us know when you are headed to Mexico :-), We will be following your posts.
    Rheyanna

  12. Posted June 7, 2008 at 9:26 am | Permalink

    Rheyanna,

    Yeah, we are at $4+ a gallon for gas and it usually goes up a dollar with tourist season. Cigarettes are at $6.15 a pack now and we pay better than 10% state taxes minimum. Way more for us self employed and that is after the feds take their 35% self employment tax.

    Now I am supposed to hire an accountant to decipher the states possible quagmire of taxation? I am not kidding when I way this could destroy our ability to do business on the Internet, especially for the little guy.