New York’s Internet Tax Grab

Until February, I had worked as the managing editor and then editor of National Journal’s Technology Daily for seven-plus years. One of our recurring areas of coverage was the never-ending push by politicians to find ways to tax the Internet.

As the Wall Street Journal shows in an editorial about New York’s latest attempt at an Internet tax grab, the Supreme Court has made such taxes all but impossible by holding, rightly, that Congress alone has authority over interstate commerce. One state can’t tax consumers in another state for purchases made online.

But that reality won’t keep the tax-and-spenders from trying:

New York Gov. David Paterson is not repeating the worst mistakes of his predecessor. That’s too high, or perhaps we should say too low, a bar. Still, the new governor has resurrected one of Eliot Spitzer’s least popular ideas, a tax on Internet sales that he hopes will raise more than $70 million a year. Despised by consumers and constitutional scholars alike, this new tax will hit e-shoppers within weeks.

By signing the state’s budget, Mr. Paterson is now attempting to do what Mr. Spitzer only threatened: force out-of-state retailers such as Amazon.com to collect New York’s sales taxes, which approach 9 percent, including local levies.

The bad news for New Yorkers, the Journal predicts, is that “some companies will feel pressure to pay instead of doing battle with a state government” until a court overturns this tax grab.

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