On January 21, Governor Cuomo delivered his State of the State address, along with proposing the new budget. The budget has a number of new tax proposals. One of those proposals would have a significant impact on e-commerce companies. Part X of the budget proposal amends the sales tax statutes to require marketplace providers to collect and remit sales tax on sales to New York customers. A marketplace provider is a person who, pursuant to an agreement with a seller, “facilitates a sale, occupancy, or admission” by the seller. A person can be a marketplace provider if they facilitate the sale, or are an affiliate of a person facilitating the sale. For purposes of this definition, affiliate companies are companies that have common ownership of 5 percent.
“Facilitates a sale, occupancy, or admission” means:
(1) such person, or an affiliated person, collects the receipts, rent or amusement charge paid by a customer, occupant or patron to a marketplace seller; and
(2) such person performs either of the following activities:
(A) provides the forum in which, or by means of which, the sale takes place or the offer of occupancy or admission is accepted, including a shop, store or booth, or an internet website, catalog or a similar forum; or
(B) arranges for the exchange of information or messages between the customer, occupant or patron, as the case may be, and the marketplace seller.
A marketplace provider meeting these requirements would be required to collect as if the marketplace provider were the vendor.
Under current law, a seller is required to collect and remit tax on sales made to New York customers. Under the budget proposal, a seller would no longer be required to collect if the marketplace provider provides a collection certificate to the seller. (The Division of Taxation is required to develop procedures to administer the certificate). If a marketplace provider does not provide a collection certificate, but does use language approved by the Division of Taxation and Finance in a publicly-available agreement, that will have the same effect as the provision of a collection certificate.
The imposition under the proposal is directly on the marketplace provider. There does not appear to currently be any provision that would allow a seller in a marketplace to collect instead of the marketplace provider, if the seller so desired.
Marketplace providers are relieved of liability if the information provided to them by the seller is incorrect. However, there is no provision in the bill requiring the marketplace sellers to provide any information to the marketplace provider.
The law does not change existing nexus or ‘doing business’ requirements. It appears that a marketplace provider would be required to collect only if the marketplace provider has nexus with New York under the Commerce Clause.
This proposal would have a significant effect on e-commerce companies, and could have an impact reminiscent of the impact of the click-through statutes. Companies that sell through a marketplace may not be concerned about this specific act if they already collect in New York. However, if this proposal is successful, then it could be copied by many other states the same way that click-through statutes were copied. As with click-through, it would not be surprising if the constitutionality of this provision were challenged.
