Recently, Gov. Cuomo proposed an online marketplace tax that would require marketplace providers such as Etsy, eBay, and Amazon to collect sales tax for transactions between New York customers and out-of-state sellers—the first tax of this kind in the U.S. The state already collects taxes on online sales where the seller and buyer are both in New York—the same as if you visited a brick-and-mortar store in New York and paid local taxes.
The new proposal is highly problematic for several reasons. First, because it would only apply to marketplace providers with a nexus to New York, marketplace providers will have an incentive to open offices outside of New York in order to avoid the tax. Second, this tax sends the wrong message to all tech companies, regardless of their business, about New York’s desire to establish a welcoming environment for our community. Being first in the nation on an issue like this does not reflect well on our state. Finally, there are significant operational challenges associated with imposing this tax. For example, in the case of Etsy, US flags are exempt from NY sales tax, but Etsy may not know which of the 14,459 items tagged "US flag" on its platform qualifies for that exemption. And shifting the responsibility of tax collection onto the marketplace providers in this way undermines the nature of the business model and could impact how these types of marketplaces function in the future.
Please read our policy debrief here and our recent op-ed in the NY Post by Executive Director Julie Samuels. If you are interested in joining in our effort to oppose this misguided measure, please email policy director Jarret Hova at firstname.lastname@example.org.