June 2, 2008
In New York on Sunday, a new law went into effect requiring Internet retailers to collect sales tax from customers. Until now, firms that didn't have a store or other physical assets in the state were not required to collect the tax. Major Web companies, including Amazon and Overstock, are challenging the new law.
JIM ZARROLI: Right now, people who buy things online are required to pay sales tax, but they're supposed to make arrangements to pay it on their own. A Supreme Court decision said that Internet companies don't actually have to collect sales tax unless they maintain a substantial physical presence in the customer's state.
A law signed into effect by New York Governor David Patterson last month would change that. It says any Web site that collects a fee for referring an Internet user to a retailer has to collect 8.75 percent tax on products sold to state residents. That would include numerous small and large Web sites and even some blogs.
Like other states, New York says it's losing tax revenue because most Internet customers don't pay sales tax. The law has already been challenged in court by Amazon. On Friday, Overstock.com filed suit, seeking an injunction against the law. It wants it declared unconstitutional. Overstock is based in Utah and says it shouldn't be responsible for collecting New York tax. It also says it's warned its New York-based Web affiliates they can no longer refer customers to the site.
Jim Zarroli, NPR News, New York.