New York Governor’s Proposed Online Marketplace Tax Could Hurt Small Businesses

New York Gov. Andrew Cuomo has proposed new regulations that would force “online marketplaces” with a value over $100 million to collect and remit sales taxes.

Research indicates that approximately 80 percent of Americans are online shoppers, so these regulations would result in new tax obligations for the majority of the country’s citizens. Additionally, this policy would affect many small businesses in New York who sell items on these platforms.

In the governor’s proposal, marketplace providers, including eBay, Etsy and Amazon, will become the ones playing tax collector. By requiring these companies to collect sales tax on every sale made to a New Yorker through those platforms, even if the seller has no property or employees in the state, it will result in complex tax-collection rules, which may make them less likely to want to sell to New York residents.

Additionally, the burden of being forced to play tax collector for the state would be cumbersome, while these platforms have helped open worldwide opportunities for New York-based small sellers.

Although those lobbying for the policy say it would “level the playing field” and aid struggling small businesses, others say that the playing field is already level. Under the current rules, all businesses with property or employees in New York state, whether they are brick-and-mortar or web-based, already collect the state’s sales tax.

It’s a complex situation. If Cuomo’s proposal is successful, New Yorkers who sell online could be subject to audits from states where they have never stepped foot. This could cause significant problems for local businesses who take advantage of convenient sales platforms like Amazon and Etsy.

Some analysts believe that this internet sales tax expansion would punish sellers and shoppers, and could result in small sellers avoiding using these platforms, in addition to new platforms choosing to not be located in New York.


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