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Could This be the End of the Line For Tax-Free Online Shopping?

Senior Writer

March 29, 2017

When you buy handmade jewelry or a used laptop on eBay or Etsy or Amazon Marketplace (not directly from Amazon.com), you typically don’t have to pay sales tax.

However, that might change before long. And it could end up costing you money.

The state of New York is having a big legislative fight over a plan to make online marketplaces collect sales tax on any purchases from buyers in New York. The plan may or may not pass this year.

It if does pass, though, New York is just the tip of the iceberg. New Mexico and Rhode Island are thinking about doing the same thing. If they do it, the idea could quickly spread to all 45 states that charge sales taxes.

“If it’s a success in one state, others will almost certainly take it up,” Max Behlke, director of budget and tax at the National Conference of State Legislatures, told Time magazine.

This is just the latest stage in a long, ongoing battle.

For years, brick-and-mortar merchants have argued that it’s totally unfair that online sellers don’t have to charge sales taxes.

For years, the biggest online seller, Amazon, fought hard against paying those state sales taxes.

But that part of the battle is over. Beginning April 1, Amazon will start collecting sales taxes from all 45 states that charge sales taxes. (The only states that don’t charge sales taxes are Alaska, Delaware, Montana, New Hampshire and Oregon.)

Now for the next phase of the battle. Online marketplaces like eBay, Etsy and Amazon’s marketplace (where shoppers buy stuff not directly sold by Amazon) generally don’t pay state sales taxes unless the buyer and seller are in the same state.

New York Gov. Andrew Cuomo wants to change that. He wants to require online marketplaces that process at least $100 million in sales a year from New York buyers to start collecting sales taxes. That would affect eBay, Etsy and Amazon’s marketplace.

Naturally, the online marketplaces hate the idea and are fighting it.

“It sets a dangerous precedent and it’s a slippery slope,” Matthew Mincieli of TechNet, a network of tech CEOs, told the New York Daily News. “If New York does it, New Jersey is going to say, ‘we need to do it.’”

Naturally, New York’s governor and brick-and-mortar merchants love the idea.

Cuomo’s administration calls this a plan to “modernize sales tax collections to reflect the internet economy” and says it could rake in $200 million in revenue over the next two years.