They’re going to court to try to stop New York State’s scheme to tax online sales:
Amazon.com has filed a lawsuit challenging New York State’s new law forcing online retailers to collect sales tax on shipments to state residents.
On Friday, Amazon filed a complaint in State Supreme Court in Manhattan objecting to the law, which was approved as part of the $122 billion state budget that Gov. David A. Paterson signed last week. The law is expected to raise about $50 million.
The issue is not whether people should pay tax when they buy goods from out-of-state sellers like Amazon. For decades, the state has required them to pay sales or use tax.
The question is whether the vendors must collect that tax on behalf of the state. Generally, only those companies that have a physical presence — like an office or store — in the state where the purchase is made are required to collect the tax.
The new law is based on a novel definition of what constitutes a presence in the state: It includes any Web site based in the state that earns a referral fee for sending customers to an online retailer. Amazon has hundreds of thousands of affiliates — from big publishers to tiny blogs — that feature links to its products. The state law says that thousands of those have given an address in New York State, although the addresses have not been verified.
The law says that if even one of those affiliates is in New York State, Amazon must collect sales tax on everything sold in the state, even if it is not sold through the affiliate. This is an extension of an existing rule that companies employing independent agents or representatives to solicit business must collect taxes for the state.
Amazon’s suit challenges the constitutionality of this interpretation and seeks a declaratory judgment that it is invalid.
This is, of course, nothing more than a blatant money grab on New York’s part. Hopefully, the suit will be successful, because, if it’s not, I can easily see other state’s adopting similar taxes.
