Newegg to New York: We won't pay sales tax

Earlier this year, New York made waves by passing a law that said, in a nutshell, that many Internet retailers (if not all of them) had to start collecting sales tax from New York residents when they made purchases online, even if the company doing the selling was located in another state.

Amazon filed suit against the state in May, but that could take years to settle out. Meanwhile, one company, tech retailer Newegg, is taking a different approach to the issue. The company said over the weekend that it's simply not going to collect or pay the tax any more.

From PC Magazine: "'After careful review and consideration, we are pleased to inform you that we have stopped collecting New York sales tax, effective August 21, 2008,' Newegg spokesman Bernard Luthi wrote in a Friday e-mail to customers. 'This decision was driven by your direct and candid feedback and our continued commitment to you as our valued customers.'"

It's an interesting tactic which puts the ball back in New York's court if it wants to try to obtain the money from Newegg. Since Newegg is based in California, how will the state sue the company, and where? And a lawsuit would force the state to open up the issue of whether the new sales tax is constitutional: Newegg would make the state do all the legal dirty work that Amazon is currently having to deal with. In other words, by simply going to court, the legislature would invite judicial inquiry into its own law. So far, compliance with the law is said to be lax.

Good for Newegg (and better for its customers) for standing up against the law. Most observers fear that, if New York's collection goes smoothly, other states will quickly follow suit.

LINK: Newegg Stops Collecting NY Sales Tax