Independent booksellers are abuzz about a recent post on Maud Newton‘s blog concerning a new policy decision by the New York Department of Tax & Finance to begin collecting sales tax from Internet retailers. “Supreme Court case law allows states to require an out-of-state seller to register for and collect sales tax where the seller has an agent or representative soliciting sales in the state,” Newton notes, and the department has now determined that affiliate programs, through which individual website owners receive commissions for each sale they refer, through hyperlinks, to online vendors (including bookstores), create precisely the sort of “agent or representative” the case law requires. The department’s memo (PDF download) illustrates the principle with a hypothetical “Mr. Smith”:
“The e-commerce retailer is considered to be soliciting business through Mr. Smith, who is acting as an independent contractor, agent or other representative of the e-commerce retailer, and making sales of taxable tangible personal property to persons within New York State. Therefore, the e-commerce retailer must register as a New York sales tax vendor, collect the New York State and local sales taxes, and file the required sales tax returns.”
Newton’s opinion? “While there will undoubtedly be arguments about what constitutes an agent or representative, and other aspects of the state’s position,” she writes, “I think New York ultimately wins on this.” Left unsaid: If New York “wins,” how soon before other states follow suit? And, ultimately, what does that do to the frictionless* online economy?
*In the sense that a lack of sales tax has contributed to the success of many online vendors; as Newton had written years ago, the tensions over this issue are longstanding.