How this tax could make NY a no-go for tech startups

New York state leads in many things: fashion, finance, food, media, museums — all of which helps attract people and businesses and creates the state’s vibrant and diverse economy. And yet, if Gov. Cuomo gets his way, New York will lead in another way: Enacting a foolish Internet-marketplace tax that’ll hurt the state’s attractiveness to businesses.

New York already collects taxes on Internet-marketplace sales — like those on Etsy, eBay and Amazon — when those sales occur between a New York seller and a New York buyer. It makes sense because these sales are essentially the same as the everyday transactions between New Yorkers that happen at any local brick-and-mortar shop.

What doesn’t make sense, however, is what Cuomo is trying to do now: Require Web sites to collect taxes on behalf of out-of-state sellers and New York-based buyers, as long as the marketplace has a presence in New York.

This senseless proposal sends a concerning message to Internet marketplaces and all tech companies that they may not be welcome here. Indeed, only two other states have passed similar taxes (both are tied up in litigation and haven’t been implemented): Alabama and South Dakota.

New York’s tech community sees two main ways the tax would hurt our state:

  • It will dull New York’s appeal as a home for tech companies. Because it would only apply to marketplaces that have a presence in New York, it encourages new marketplaces to start elsewhere and existing companies to grow elsewhere.

Proponents of the tax claim this isn’t a real threat because the tax would only apply to companies that facilitate $100 million in annual sales; but, of course, every company hopes and plans to do that kind of business one day.

  • Complying with such a tax is a heavy operational burden for companies. Tax codes are incredibly complex. Rates vary by the buyer’s location, what they purchase and even the day of the year.

Plus, marketplaces often lack the information necessary to…

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