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The Tax Man Cometh….on June 1st

New York State recently passed an interstate sales tax law that threatens to impose tax collection burdens on catalog and online retailers in every state of the country.  It requires out-of-state retailers to collect sales taxes on purchases made by New York residents.  The retailers must register as vendors with New York by June 1 – less than one month away. 

Today, current law mandates that a business must have physical presence or nexus in a state in order to be required to charge sales tax in that state.  This “nexus” may be the one point of contention that businesses have against this law.

To that end, we’d like to encourage states to take a close look at model legislation developed by The American Legislative Exchange Council (ALEC).  Three states – VA, Iowa and Texas – have already passed it.  While it won’t change this existing NY law, it will help to guarantee that home state businesses have a home state forum to settle questions of nexus and tax responsibility.

This legislation simply gives a special declaratory judgment action, which a business can seek in their home state courts to determine if that business has the requisite nexus, or physical presence in another state which would justify the requirement to collect and remit sales and use taxes. 

It gives in-state retailers important protection from unfair and costly litigation in foreign-state courts, by foreign-state tax administrators. 

We encourage states to protect their state’s businesses from New York’s tax collection burdens, by introducing this ALEC model legislation.