10.01.2008 0

New York State Web Tariff

  • On: 10/06/2008 12:33:30
  • In: Taxes
  • What do you call it when a government places an additional cost on the price of imported goods? A tariff.

    Proving once again that there is no limit to how far the Left will go to undermine the free market, a tariff is exactly what New York State Governor David Paterson, a Democrat, wants to impose on all out-of-state Internet sales. According to the Wall Street Journal, he is applying New York’s sales tax to any purchase a New Yorker makes on the Internet from an out-of-state retailer:

    “[T]he new Governor has resurrected one of Eliot Spitzer’s least popular ideas, a tax on Internet sales that he hopes will raise more than $70 million a year. Despised by consumers and constitutional scholars alike, this new tax will hit e-shoppers within weeks.

    “By signing the state’s budget, Mr. Paterson is now attempting to do what Mr. Spitzer only threatened: Force out-of-state retailers such as Amazon.com to collect New York’s sales taxes, which approach 9%, including local levies. A 1992 Supreme Court decision called Quill bars exactly this type of money grab. The Supremes ruled that forcing such obligations on companies with no employees or buildings in a state could cripple interstate commerce. Without Quill, small Web merchants would have to answer to 7,500 state and local tax collectors.”

    In truth, the Supreme Court’s 1992 decision did not go far enough. The Federal Constitution gives to Congress (in Art. I, Sec. 8) the power to place tariffs on imports, and the States are prohibited from doing so without the consent of Congress (in Art. I, Sec. 10). In other words, Congress’ power to place tariffs preempts any power of the States to do so, to say nothing of placing tariffs on goods purchased inside the United States.

    Of course, the States who set up Internet sales taxes for out-of-state purchases do not believe that what they are doing amounts to a tariff. They simply believe they are entitled to the revenue based on the mere fact that money is changing hands. They want a piece of that pie, and they want it badly. And in New York, they want it to the tune of $70 million annually.

    What will this mean for consumers in New York? Say you log onto Amazon to buy a book or movie. Right now, unless you live in Washington, Kansas, Kentucky, or North Dakota, you would not pay a sales tax. Under New York’s new law, they will pay up to 9% extra on every single purchase.

    If New York is worried that their onerous taxes and regulations make their businesses uncompetitive in the Internet marketplace, perhaps it ought to stop overtaxing and overregulating! Perhaps consumers do not want to deal with the Empire State’s imperial hubris.

    According to the Tax Foundation, New York already ranks 48th in business tax climate, and in the words of the Journal’s editorial, “Mr. Paterson’s money grab could make New York the biggest loser when it comes to tax competitiveness.”

    ALG Prediction: A few years ago, New York did the same thing to out-of-state purchases of cigarettes. Now, they are getting greedy. New York’s web tariff will be struck down in the courts because to allow it to stand would deal a mortal blow to interstate commerce, and would ruin the last bastion of the free market: the Internet.


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