A battle is brewing over U.S. state sales taxes on online purchases. Amazon.com and Overstock.com are scaling back their operations in states that demand they collect these taxes. It won't hurt their bottom line very much, but it foreshadows a larger clash over the taxation of internet commerce. Cash-strapped states are trying to get all they can.
Most online sales escape being taxed because internet firms only collect them in states where they have a physical presence. (According to the law, buyers are legally bound to pay them, but many don't.) But Amazon and Overstock allow independent companies to sell merchandise through their sites for a fee. What this means is that online giants have to collect taxes in any state where their independent partners have operations.
New York passed a law last year implementing the rule and Amazon and Overstock challenged it in court and lost. Since then Hawaii, North Carolina and Rhode Island have passed similar measures. So Amazon and Overstock have cancelled their associate programs in those states.
Not a big deal for their bottom line, but this could become a larger problem. Looks like we will have more online taxes in our future.
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