Dear Governor:

As the trade associations representing the thousands of independent businesses in the state, we are writing to update you on an important action New York State recently took to help ensure sales tax fairness, and to recoup tens of millions of dollars of lost sales tax revenue. New York's actions have clear implications for this state.

In its new budget, adopted on April 15, New York is requiring out-of-state merchants, such as Amazon.com, that have clear nexus in the state, to collect and remit sales tax. And while Amazon.com has chosen to challenge the provision in court, it has also announced that as of June 1 it will begin collecting sales tax on sales to New York State residents. This important sales tax law clarification will garner New York State a projected $47 million in new revenue this fiscal year, and potentially more than $70 million next year.

We are asking you to follow New York State's lead by equitably enforcing existing sales tax laws by requiring out-of-state retailers and commercial resellers with nexus in our state to collect sales tax.

Like so many other states around the country, our state is faced with a daunting challenge: how to balance the budget at a time when costs are increasing and revenues are in decline. In almost every state throughout the country, the budget numbers are troubling. According to the National Conference of State Legislatures State Budget Update, some 23 states are faced with projected budget shortfalls for fiscal 2009; at least 16 states expect to reduce spending or eliminate programs; and eight are considering tax increases. Moreover, 16 states reported that their general sales tax collections fell below projections, and in nine of these collections were failing to meet reduced estimates; 12 states indicated that personal income tax collections would not meet projections; and 16 noted that their corporate income tax collections were below expectations.

These numbers are only going to get worse if states continue unintentionally to subsidize out-of-state businesses by allowing remote merchants with nexus in the state to skirt existing tax laws, thereby letting millions of dollars in sales tax revenue go uncollected. As online shopping grows, more and more consumers will eschew locally owned businesses for the tax-free shopping offered by out-of-state online retailers and commercial resellers. Left alone, this exodus will be devastating to our economy. It will force an increasing number of in-state businesses to cut staff and close each year, meaning the decline in revenue from sales, personal, and corporate income taxes will simply accelerate.

Faced with such grim financial forecasts, states around the country are seeking solutions. New York State has provided one answer, and that is to enforce existing sales tax laws now.

While some large merchants that have a clear competitive interest in maintaining the status quo would claim otherwise, New York State has it right: Legal precedent clearly establishes nexus (and the responsibility to collect and remit sales tax) when an out-of-state company has affiliates that act as sales agents operating on its behalf in a state. And the technology necessary for companies to administer the collection is today both readily affordable and available. (Ironically, Amazon.com already collects sales tax in this state for such companies as Target.com through its Amazon Enterprise Solutions division.)

Governor, every analysis makes clear that locally owned businesses have far greater economic impact on their communities, contribute more to local charities, and are largely responsible for our villages, towns, and cities retaining their unique characteristics. To undercut them, by selectively deciding what laws to enforce and what laws to ignore, is simply wrong.

Kathleen McHugh, CAE
American Specialty Toy Retailing Association
116 W Illinois St
Suite 5E
Chicago, IL 60610