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Online retailers double take at NY sales tax law.  Why does a new law that should be good news for Amazon.com competitors have them worrying (see flood gates)?

Not all comic book shops have an online store, or even an ebay store.  Dealing with local sales tax is enough of a headache without trying to figure out tax rates for every state.  Luckily, the Supreme Court said not to worry about out of state customers for sales tax purposes (Quill Corp. v. North Dakota).  The precedent being that retailers not based in a state should have to collect sales tax in that state.  But New York’s latest tax law goes after companies like (or specifically) Amazon and Overstock who have affiliates in the state by equating them as an extension of the business itself.  Amazons reaction was to challenge it, Overstocks was to drop their affiliates.

On one hand this is good news for small shops who sell online.  For comic shops who would go broke offering the price break found on most Amazon graphic novels listings, they now have a clear advantage over Amazon by offering their goods tax free.  In fact, some groups like American Bookseller Association were please with the law singling out their toughest competitor, claiming that for too long, e-retailers skirt the law.

The bad news?  NY Courts have already dismissed Amazon’s lawsuit against the state even though they don’t have a physical presence in the state.  And while Amazon is sure to carry this all the way to the Supreme Court, this tax law could become granularized down to the county level.  And why not?  Our economy is the worst it has been in our lifetime.  Cities, counties, and states have to figure out new ways of getting tax revenue and passing laws on the last bastion of unregulated commerce is too tempting to pass up.  New York is also considering collecting taxes on digital downloads which are currently tax-exempt.  Georgia, in the midst of major budget shortfalls, is already throwing around the idea of taxing online sales. North Carolina just proposed a law to expand their sales tax code to included digital purchases as well. And the other 7,500+ tax collecting entities will want their piece of the pie as well.

Online stores which collect under 10k from NY Residents annually are except from this law.  However, the precedent this sets is worrisome to shops who already have enough burdening tax laws to contend with.  In Texas, for example, retail stores pay a property tax on any inventory that hasn’t sold.  All those back issues that comic enthusiasts love when they walk into their favorite store actually cost the store money.

Amazon is fighting this and the 43 other states who collect sales tax are watching in earnest.  So is your local comic shop.

*notice the Stranger with Candy reference.