Spitzer Does Things On His (One) Terms!

Get rid of one problem and take on another that will surely boost those sagging numbers:

New Yorkers going Christmas shopping online at Amazon.com will find an 8.375% surprise at the virtual cash register, courtesy of Governor Spitzer, who is moving aggressively to collect Internet sales taxes that have gone widely unenforced.

Under a new policy, major electronic retailers, such as Amazon.com, will be required to collect sales tax on all purchases from New York. The policy, based on a novel legal theory, could hasten the end of the Internet’s era as a duty-free marketplace if other states follow New York’s lead. With the policy, New York immediately took the lead among states that are seeking to tax online commerce.

“I’d say this puts us at the front,” one state tax official, who requested anonymity, told The New York Sun.

Having pledged not to raise taxes, Mr. Spitzer is increasingly scrounging for ways to close a projected $4.3 billion deficit next year. State officials estimate that this latest initiative, which goes into effect in December, will bring in about $100 million more each year, split between state and local government tax revenue. Statewide, the sales tax averages about 8%, although in New York City it is 8.375%.

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When it comes to charging sales tax, e-retailers have been held to the same old standard that the U.S. Supreme Court set for mail-order vendors: The seller only needs to collect the tax on purchases in states where the vendor has a physical presence, such as a storefront or salesman. New York is saying that it has found a way around that obstacle to tax collection. Many e-retailers may have unwittingly lost their exemption because of the way they direct traffic to their Web sites, according to a tax memo recently released by the state’s tax department.

At issue is the “affiliate program” used by many e-retailers. Web site operators can provide a link to an e-retailer in return for a commission on any sale resulting from customers using the link. While the affiliate program may consist of little more than a non-descript advertisement on the computer screen, the tax consequences may be huge: New York state says it is the equivalent of having an instate salesperson.

“It’s just treating the affiliate the same way we would treat any other type of sales representative,” Mr. Spitzer’s budget director, Paul Francis, said in an interview.