An estimated $50 million of sales taxes due to New York state and New York City from sales by Internet retailers went uncollected in fiscal 2007, according to a report released last week by the New York City Independent Budget Office.
The state passed a law in June that requires online retailers to collect taxes on certain purchases.
“In recent years, the sales tax has comprised a declining share of total city tax revenues,” the report said. “Rising levels of untaxed Internet sales is likely one of the reasons for this decline.”
The law is commonly referred to as the “Amazon tax” after Amazon.com LLC, the largest Internet retailer.
Of $4.4 billion of e-commerce sales of products and services generated in fiscal 2007, about $2.2 billion was taxable, the IBO reported. Taxes on those transactions should have yielded $91 million for the state and $82 million for the city but fell short by about $21 million for the state and $29 million for the city, according to the report.
New York residents are supposed to pay taxes on some of their Internet purchases if the retailer does not, but collection is difficult to administer, the report said.
Amazon, and others, have filed suit against New York over the tax but Amazon has started collecting it and currently charges sales tax in Kansas, Kentucky, North Dakota, New York, and Washington. If the law survives court challenges it would bring the state an estimated $70 million in additional revenue in fiscal 2010, which begins on April 1, and $40 million in the city’s fiscal 2010, which begins on July 1.
