By Ashley M. Casey

Staff Writer

Patrick Penfield has his hands full. The senior class president at Baker High School owns two small businesses selling antiques, collectibles and watches: Penfield Antiques and American Watch Company. Now, Penfield might have another issue on his hands: Gov. Andrew Cuomo’s proposed online marketplace tax.

The governor’s executive budget for 2017-18 would force online marketplaces such as eBay and Etsy to collect sales tax on items purchased by New Yorkers. While Penfield’s businesses and other New York companies already collect local and state sales taxes on their transactions, Penfield is afraid the governor’s proposal could frighten away potential buyers. The lion’s share of Penfield’s transactions occur online through eBay and PayPal.

“I feel like online business is a lot different from a brick-and-mortar store,” Penfield said. “There’s already a lot of competition online and it’s hard to find customers.”

Cuomo’s online marketplace tax isn’t entirely a new idea. In 2008, New York instituted the “Amazon tax,” which required Amazon and other online retail giants to collect sales tax. Where Cuomo’s tax proposal breaks new ground is on “marketplace” sites, platforms provided by Etsy, Amazon and eBay which act as a third-party conduit for smaller enterprises to sell their wares, somewhat like a consignment shop.

“It would destroy a lot of businesses,” Penfield said. “I don’t see how it would help by taxing more people.”

Leveling the playing field

Supporters of the online marketplace tax say the proposal levels the playing field between online sellers and traditional stores.

“Other sellers are paying the tax in New York,” Assemblyman William Magnarelli (D-Syracuse) said. “Why should other sellers using these platforms not have to pay the tax?”

Magnarelli said it’s only fair that all sales involving a party in New York state, whether it’s the seller or the buyer, are subject to sales tax.

“The seller could be anywhere, but [if] you’re selling into New York then you’ve got to pay,” he said.

Assemblyman Will Barclay (R-Pulaski) is questioning the legality of that logic. According to a U.S. Supreme Court ruling, a state cannot levy a tax on an out-of-state seller unless the seller has a “nexus,” or physical presence, in the state.

“I imagine we’ll see litigation on this,” Barclay said. “These are not New York-based businesses [objecting]. I think it’s suspect legally and it might be stretching.”

Barclay is also skeptical of the proposal’s revenue potential. The governor’s anticipated revenue for the online marketplace tax is $68 million in its first fiscal year and $136 million the year after.

“I wouldn’t say that’s insignificant, but at the same time, when you’re talking a $153 billion budget [it doesn’t go far],” Barclay said.

Barclay said if he had to vote on the online marketplace tax today, he would vote against it. The State Assembly included the measure in its one-house budget passed last week, but the State Senate did not.

State Sen. John A. DeFrancisco (R-Syracuse) is opposed to the online marketplace tax, as well.

“I’m against it. I’m against all tax increases that are proposed in this budget or any other budget, for that matter,” DeFrancisco said.

DeFrancisco said the online marketplace tax would hurt small businesses and suggested the state focus on trimming expenditures rather than raising taxes.

“We’ve got to maintain some type of business climate in the state of New York, hopefully a good one,” he said. “But the way we’ve been going in recent years is the opposite direction with the millionaires’ tax and more free stuff like college education.”

DeFrancisco said New York’s taxes are responsible for the exodus of taxpayers from the state.

“Our gains in population have been less than other states. We’ve been losing congressional representatives. It’s worse now because we now have gone to net loss, not just in relation to other states,” he said. “More people leave than come back to the state of New York or [are] born in the state of New York as a result. Our tax policies, in my mind, are the chief responsibility and we’ve got to reverse that trend.”

Penfield starts petition

Penfield said the proposed tax measure could hurt his consumers.

“The state doesn’t want to tax small businesses directly, instead taxing the end user, [so this] could decrease our sales. At the same time eBay and other online sellers can find ways to make up the difference in a negative way,” he said, citing administrative fees as a way marketplace websites could offset the tax.

“It would definitely force me to raise prices. I’m sure it would force a ton of businesses to raise prices,” Penfield added.

Penfield has started a change.org petition pleading with state legislators and the governor to reject the online marketplace tax measure. The petition is available at bit.ly/penfieldtax.

“If it does go through, I want to repeal it, obviously, fight it as much as I possibly can,” he said. “I’m hoping I can get a lot of senators and assemblymen to agree with me that it shouldn’t go through.”

Penfield said he has contacted local assemblymembers, state senators and economic development agencies to no avail.

“They haven’t gotten back to me yet. It’s very discouraging,” he said. “I’m trying to fight for small business.”