DMA Testifies in Opposition to Governor Spitzer's Proposal to Tax Out-Of-State Marketers

February 19, 2008 — In testimony submitted last week to both the New York State Senate Committee on Finance and New York State Assembly Committee on Ways and Means, the Direct Marketing Association (DMA) expressed strong opposition to Governor Eliot Spitzer’s recent legislative proposal requiring out-of-state marketers to begin collecting sales tax on deliveries made into New York, based merely on a link to the marketer’s website.

In his testimony, DMA Vice President for Government Affairs Mark Micali called the proposed law, “an unabashed attempt by New York State government to expand the reach of its tax system across state borders to businesses, which have no physical presence in the state.”

Commenting on the proposed state legislation, DMA Executive Vice President for Government Affairs and Corporate Responsibility Steven K. Berry noted that, “this legislation would violate the Interstate Commerce Clause of the Constitution.” Berry added, “the United States Supreme Court has been consistent and unwavering in holding that a state cannot impose sales tax collection obligations on out-of-state vendors — unless the vendor has a physical presence in the taxing state.”

Given this legislation’s questionable constitutional status, the DMA testimony called upon the New York legislature to seek an advisory opinion from the New York Attorney General’s office regarding the constitutionality of this proposal before taking any action on this legislation.

DMA’s testimony also pointed out that New York has long benefited from being recognized as the undisputed center for advertising and marketing. Further, DMA said, New York promotes itself as a hub of a sophisticated network of business relationships that are central to the growth of e-commerce. Accordingly, DMA’s Micali concluded his testimony by noting that adoption of this legislation would be tantamount to New York “hanging out the ‘unwelcome’ sign to electronic commerce.”

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