NY Plan to Require Sales Taxes Dropped. DMA Pleased at Reversal, Remains Committed to Keeping All Marketing Channels Open

November 15, 2007 — The Direct Marketing Association constantly works to support the free flow of commerce online and in the entire multichannelled direct marketing community, and was pleased that New York Governor Eliot Spitzer yesterday rescinded a plan that would have required many out-of-state online companies to collect sales tax from New Yorkers, as reported by the Houston Chronicle.

In response to the initial announcement of the proposed online tax regulation, DMA Executive Vice President for Government Affairs & Corporate Responsibility Steven K. Berry issued a statement, saying, “It is unfortunate and particularly ill-timed to impose a legally questionable tax collection responsibility just as companies are headed into the all-important holiday season. This is an overreach of authority that will harm consumers and merchants both in New York and nationwide . . . This directive goes against the United States Supreme Court’s landmark Quill decision, and thus would not survive legal scrutiny.”

This weekend, the Chronicle reported, the state Department of Taxation and Finance had issued a memo this that would have targeted companies that do online business in New York, but don't have brick-and-mortar presences in the state.

According to the Chronicle, State Budget Director Paul Francis issued a statement, saying "Governor Spitzer believes that now is not the right time to be increasing sales taxes on New Yorkers. He has directed the Department of Tax and Finance to pull back its interpretation that would require some Internet retailers that do not collect sales tax to do so."

The Houston Chronicle article went on to explain that, under the policy, online businesses that used an online agent or representative physically located in New York to make sales, would have been required to register as New York state vendors and to collect and report state and local sales taxes from customers living in New York

Mark Micali, DMA’s VP of government affairs, commented, saying “Businesses depend on a robust fourth quarter to meet payrolls and operating expenses. The last thing businesses or consumers need is uncertainty in the marketplace."

After learning of Governor Spitzer’s reversal of the proposed plan, Steven K. Berry said, "Although DMA is pleased the proposed regulation was rescinded, we remain fully committed to support the Supreme Court's decision in Quill."

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