New York state wants a bit of the revenue that is exchanged on internet purchases. The state is planning to place a tax on internet transactions:

“NEW YORK (CBS) ― New York Internet shoppers, take note: in five weeks, sales tax-free shopping will end on many Web sites thanks to rewritten state rules that are trying to force Internet retailers to collect.”

link: N.Y. Orders Large Web Retailers To Charge Tax

If the tax plan is followed, it will generate a significant tax revenue for the state. However, if a buyer of some merchandise is in California, Australia or Greenland and purchases from a New York state company, why should that individual be force to pay the tax? The tax would benefit New York and it would act as a penalty for out-of-state buyers to do business online with New York state merchants.

Legislation such as this might generate state revenue temporarily. However, once businesses realize a decrease in revenue, those operations will move their corporate identity offshore and away from the tax burden. The internet business can relocate and have an identity in a tax free haven. The short term gain for New York state may result in long term pain.

Catherine Forsythe
Director of Operations
FlyingHamster:  http://flyinghamster.com/

[tag]new york state, tax, business, internet, legislation, location, corporate identity[/tag]