Bad news for folks in the state of New York. Newegg has sent out a note to customers and affiliates saying it will start collecting New York sales tax starting on June 1. The note, as quoted in various forum threads, reads:
As a result of recent changes in the State of New York Tax Law requiring certain out-of-state retailers to collect and remit sales taxes to the State of New York, we regrettably inform you that Newegg.com must begin collecting applicable state and local sales tax for all orders shipped to New York addresses on or after June 1, 2008.
Qualified business customers can continue to use the Newegg.com Sales Tax Exempt Form.
Not all vendors chose to bend to the new legislation. PC Magazine reported earlier this month that Amazon filed a lawsuit over the issue, and Overstock.com ended its contracts with New York-based advertisers. Overstock stated, "New York's new tax law required us to choose between New York customers and New York ad businesses. In the end, we chose our customers."
What's the link between ads and sales tax? In an official bulletin (PDF), New York State's Department of Taxation & Finance explains, "if a business located outside New York State solicits sales of taxable tangible personal property or services through . . . independent contractors, agents, or other representatives located in New York State, the business must register as a vendor and obtain a Certificate of Authority for New York State sales tax purposes." In other words, businesses that don't advertise their presence in New York don't have to make their customers pay sales tax.
Newegg seems to have chosen differently. The company sent out a message to affiliates this morning stating, "Our relationship with our affiliate partners played a significant role in the decision process and we would like to ask for your continued support and commitment in promoting our products through your respective sites."