New York Charging Businesses to Comply with Requirement

September 17, 2009

New York is not only forcing out-of-state businesses to become tax collectors, they’re now charging for the privilege. From the Buffalo News:

The New York State Department of Taxation and Finance is sending out letters ordering businesses to renew their sales tax certificates — the piece of paper that allows them to collect sales tax on behalf of the state — and pay a renewal fee of $50 apiece.[…]

The fees collected are expected to raise about $34 million for the state over three years.[…]

Companies that do less than $37,000 in taxable sales annually and file once a year are exempt from the fee, but must renew registration.

Given that Americans are suspicious of tax increases, politicians often turn to fees (or calling things fees) for revenue. To the extent that the money compensates the government for the cost of providing a particularized service to a select group, it’s a valid fee. But if the group is just getting squeezed with the money is going to the general fund, it’s a tax.

It’s hard to say here. Who knows what it really costs New York to provide the “service” of getting a sales tax license. $34 million a year sounds like a lot. Businesses are required by law to get the license, so there’s not much of a market here either. And paying a tax to collect a tax sounds a lot like that California law we helped strike down.

It also reminds me of the first national tax in the U.S., where whiskey tax collectors were charged for the privilege of collecting the tax. Of course, they got to keep a sizeable cut of the proceeds. If they could avoid being tarred-and-feathered, that is.

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