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New York wants Amazon to collect tax for marketplace sellers

  • Jan 23, 2017 | Gail Cole

 New York's new budget proposal includes a plan to capture more online sales tax revenue.

Update 4.13.2017: New York's FY 2018 Executive Budget has been approved. It does not contain the provision to require large online marketplace providers to collect tax on third-party transactions.

Governor Andrew M. Cuomo of New York wants more online sales tax revenue. His 2017-2018 Executive Budget proposal, introduced last week, would require marketplace providers that facilitate at least $100 million in New York sales each calendar year to collect sales tax from New York consumers on behalf of their marketplace sellers. If enacted, the new policy would take effect on September 1, 2017.

The budget briefing reads, in pertinent part:

Online providers such as Amazon and eBay supply a marketplace for sellers from outside of the online provider to sell their products to consumers. Currently, such outside sellers are required to collect sales tax from New York residents if the seller is located in New York. Many marketplace providers agree to collect the tax for the outside seller in this instance. The Executive Budget requires [emphasis added] the marketplace provider to collect the tax when they facilitate the sale to residents, whether the seller is located within, or outside, New York.

The difference between Amazon and Amazon Marketplace

Amazon already collects tax on its New York sales. However, it isn’t required to collect tax on behalf of its Marketplace sellers based in another state. According to Amazon’s website, “For sales within the U.S., Amazon.com calculates sales taxes on the sellers’ behalf in accordance with their instructions. These instructions vary depending on the tax laws in each state.”

New York has had a rebuttable remote sales tax policy in place since June 1, 2008. It requires an out-of-state seller who has entered into an agreement with a resident of New York to collect and remit New York tax, provided both of the following are true:

  • “The resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an internet website or otherwise, to the seller”
  • “The cumulative gross receipts from sales by the seller to customers in the state who are referred to the seller by all residents with this type of agreement is in excess of ten thousand dollars during the preceding four quarterly periods ending on the last day of February, May, August and November”

Under Gov. Cuomo’s 2017-2018 budget proposal, Amazon.com would be required to collect and remit tax on sales made by its Marketplace sellers, even those based outside of New York. Other ecommerce providers, like eBay and Etsy, would also have to collect tax on behalf of their sellers.

This isn’t the first time Gov. Cuomo has gone after more internet sales tax revenue: His 2015-2016 budget proposal also included a provision that would have required marketplace providers such as Amazon and eBay to collect tax on behalf of their marketplace sellers' sales to New York consumers. State projections at the time predicted the requirement would generate $60 million in annual sales tax revenue.

See New York Department of Taxation and Finance TSB-M-08(3)S and TSB-M-08(3.1)S, along with Section 1101(b)(8)(vi) of New York sales and use tax laws, for additional information about New York's current policies.

The more states attempt to capture remote sales tax revenue, the more complicated sales and use tax compliance becomes. Tax automation software facilitates compliance, especially for companies doing business in more than one state. Learn more.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.