Retail Council urges collection of Internet sales tax

ALBANY, NY (11/20/2007)(readMedia)-- To the Editor:

New York State Governor Eliot Spitzer last week, through the New York State Department of Taxation and Finance issued, then rescinded, a new policy designed to require out-of-state, Internet-based merchants to collect sales and use taxes on purchases shipped in to New York.

The Retail Council of New York State, representing some 5,000 member stores of all size and variety throughout New York, has long urged the state to require such collection. The brick-and-mortar merchants operating in this state, employing hundreds of thousands of New Yorkers, and paying state and local taxes deserve the level playing field promised by equitable sales tax collection policies.

Please find enclosed an opinion article on the matter, which I have authored as president and chief executive officer of the Retail Council. I hope that you will find the topic timely and worthy of publication either as an op-ed piece or as a letter to the editor.

Please contact me at (518) 465-3586 if you have questions or require additional information.

------------------------------

The New York State Tax Department recently tried to implement a new policy to collect sales and use taxes that are now due and payable by New York residents who purchase goods and services from Internet e-commerce retailers. The proposal, which was keyed to Internet merchants, like Amazon.com, who pay commissions or other forms of referral fees to certain New York-based entities for directing sales to their Internet sites, was pulled off the table by Governor Spitzer practically before the ink was dry on the Tax Department’s “official” notice to the affected companies.

The Retail Council of New York State is not passing judgement on the merits of this specific proposal since we had no opportunity to assess it before its sudden imposition and equally sudden demise. However, the Retail Council has long advocated to previous governors and members of the state Legislature that our existing tax policy needs to be dramatically altered to properly reflect new marketplace realities. New York must stop sanctioning sales tax avoidance practices and stop giving unfair pricing advantages to out-of-state retailers at the direct expense of the storefront, taxpaying merchants who are the backbone of our mainstreet economies in New York.

The merchants represented by the Retail Council must collect and remit the state and local sales tax on practically every transaction in their stores. These are the same retailers who are seeing more and more of their customers buy online the same goods they sell from e-retailers who can undercut their selling price by at least eight percent or higher state and local sales tax. And our members are the same business taxpayers who will be looked to by our state policy makers to be an essential part of the “solution” to close the nearly $5 billion state budget deficit.

It is disconcerting to hear some official complaints and media rants that a plan to try to collect tens of millions in state and local sales taxes that are legally owed is somehow a ludicrous, overly-aggressive, and ill-conceived scheme to impose new taxes on New Yorkers. The sales tax in New York is, by definition, a consumer levy that must be paid by the purchaser. Even a retailer who wants to pay the sales tax for its customers is prohibited from doing so by state law. The retailer, however, has the legal obligation to charge, collect and remit the sales tax on transactions made in the state.

Concomitantly, the New York resident has the duty and obligation to pay the state “use” tax equivalent when making a purchase out of state or online and bringing (or shipping) it to New York. Regardless of the reality that few residents willingly pay the use tax, the tax is state law. Efforts to fully and properly enforce existing state tax law should not be ridiculed or branded as bad public policy.

Like so many things in life, timing is everything. Putting forth an ambitious plan to start collecting sales tax on Internet sales at the onset of the holiday shopping season was bound to garner attention, even criticism. But there is no better time to focus attention on the daily struggle faced by brick and mortar tax-paying retailers who are trying to compete on an unlevel playing field against Internet e-commerce tax-avoiding retailers.

When the state’s labyrinthian, convoluted sales and use tax laws were initially conceived and then amended over the years, no one imagined the very existence, let alone the breadth and depth of the e-commerce marketplace today. Hundreds of millions of tax dollars which could be used to help underwrite state and local government and help close our widening budget deficit is simply being ignored and uncollected. Do New Yorkers, already suffering the highest state and local tax burden in the nation, want to pay even more in taxes? Of course not. But getting rid of the sales tax altogether in New York is not a viable solution any more than is refusing to collect a large and growing percentage of consumer sales tax via the e-commerce arena.

Governor Spitzer and the New York State Legislature face many tough choices as they work to balance the state’s budget in the months ahead. Turning a blind eye to a valid, measurable source of tax revenue already owed should no longer be an acceptable option. With each passing week, month and year, the financial loss to the state and local governments grows larger and the burden on New York retail merchants gets heavier.

James Sherin, President and Chief Executive Officer, Retail Council of New York State