Because the EU business is not located in New York. It's located in the EU. By providing a service to an EU resident you are interacting across the US<->EU bord

Because the EU business is not located in New York. It's located in the EU. By providing a service to an EU resident you are interacting across the US<->EU border and thus EU laws restrict what services you can provide across that border. I would recommend thinking about it like shipping products overseas.