Filling out our California income tax this year, we laughed when we came upon the "Use Tax" section. Did we buy anything from out-of-state retailers that we owed California sales tax for? Of course we didn't! But whether or not we did, New York state is close to closing that loophole for its residents with the so-called "Amazon Tax."
The so-called "Amazon tax" closes a loophole for Internet retailers who derive sales through affiliate programs in which Web site owners place a link to the merchant on their site and earn a commission on sales made from referrals. In lobbying for the bill, the industry group representing New York retailers had argued that the exemption from the sales-tax collection requirement gave out-of-state online retailers an unfair competitive advantage.
"This is a first step -- but a critical one -- in our ongoing battle to level the sales tax playing field between New York retailers and the out-of-state Internet giants that have, for years, capitalized on an unfair and unintended competitive advantage driven solely by tax policy," James Sherin, president CEO of the Retail Council New York, said in a statement reacting to the bill's passage.
Of course, the 1992 Quill vs. North Dakota Supreme Court decision (which said that out-of state retailers cannot be forced to collect sales tax) is likely to mean this will be challenged, fortunately. Likely this loophole will be closed someday, however.