The New York Court of Appeals, the state’s highest court, deems these “affiliation” agreements to create an in-state sales force. Some retailers argue this is an unconstitutional abrogation of the physical presence requirement.
The aggressive approach to sales taxes taken by New York on digital purchases also impacts small businesses providing its customers with online access to certain publications. Does a consumer of online publications create a nexus in New York solely by accessing content which is created and hosted online in New York? The lawyerly answer to that question is a resounding “MAYBE”.
So, what can a small business do to protect itself from draconian civil and criminal penalties that may be imposed by the State of New York for an inadvertent failure to properly collect and timely remit sales taxes? At Aimee B. Davis Law P.C., we incorporate carefully drafted language into the vendor contracts used by our clients, which is designed to effectively shift the risk of an unanticipated sales tax liability. This safeguard allows our clients to collect and remit sales tax where applicable, as the sales tax liability minefield continues to shift over time. Of course on all tax-related matters, always first consult with your tax advisor.
If Congress passes the Marketplace Fairness Act, this confusion will become a thing of the past. The bill seeks to harmonize tax regulations across all 50 states, enabling them to collect sales taxes on online transactions from remote retailers with no physical presence in their state. Like all other things, this act has been languishing in Congress since 2013.