Spitzer Ditches Amazon Tax

In a second major policy reversal in less than a day, Governor Spitzer is backing down from a plan to require Amazon.com and other online retailers to charge state and local sales taxes on all purchases from New York.

Yesterday, just hours after The New York Sun reported on the new revenue collection scheme, the Spitzer administration announced that it was burying it for the time being — at least until after the Christmas shopping season. The move saved New York City shoppers from having to pay an additional 8.375% on many Amazon.com goods.

"Governor Spitzer believes that now is not the right time to be increasing sales taxes on New Yorkers," Mr. Spitzer's budget director, Paul Francis, said in a statement. "He has directed the Department of Tax and Finance to pull back its interpretation that would require some Internet retailers that do not collect sales tax to do so."

The turnabout came just hours after Mr. Spitzer said he was dropping his plan to allow illegal immigrants in New York to obtain driver's licenses.

In this latest instance, Mr. Spitzer wasted little time before pulling the plug on another controversial policy, aborting it before it threatened to snowball into a distraction for his administration.

Before Mr. Spitzer announced his retreat, Albany Republicans, who turned the license issue into a potent rallying cry against the governor, were drawing up plans for a fresh wave of attacks. Lawmakers said they were planning to seize on the tax policy as evidence that the governor had reneged on his pledges not to raise taxes.

Some were comparing the so-called Amazon Tax to the controversy that erupted in 1992 when New York tax agents staked out parking lots at New Jersey malls and scribbled down the license plates of New York customers taking advantage of the Garden State's lower taxes.

The Spitzer administration, which is facing a $4.3 billion deficit next year, was attempting to collect tens of millions of dollars in lost revenue from unreported use taxes from New Yorkers who shop at out-of-state online retailers, such as Amazon.com.

The policy would have forced Amazon.com to collect sales taxes by redefining what constitutes having a sufficient physical presence in New York.

The administration's new tax strategy was also bound to face legal challenges by online retailers challenging the state's interpretation of its sales tax nexus laws that define whether retailers have enough of a business presence in state that its liable for collecting local taxes.

http://www.nysun.com/article/66465