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Amazon Sues New York

Jul 1, 2008

Amazon.com has filed a suit in New York State Supreme Court, charging that New York State's recently amended sales tax law is, "invalid, illegal and unconstitutional," and that it unfairly targets Amazon.com. The law would require Amazon, and potentially some other online retailers, to pay taxes on online purchases by New York residents.

The complaint, filed against Governor, David Paterson, tax commissioner, Robert Megna, and the state's Department of Taxation, involves recent additions to state sales tax law that require online retailers to collect and remit sales tax on purchases by New York residents. The lawsuit asks the court to overturn the legislation.

Online retailers based outside of New York are not required to process sales tax unless they maintain a physical presence, such as stores or a warehouse, in the state. But New York's new sales tax law, modified as part of this year's state budget, now says that retailers have a physical presence, or nexus, if they do $10,000 or more in sales through affiliate websites based in New York.

Amazon contends that websites that participate in its associates program place on their sites advertising links to Amazon.com after submitting an application on Amazon.com, and that the process does not require Amazon to have a physical presence in New York. "Amazon's only contact with New York residents is by mail, wire, or common carrier," Amazon says in the complaint. "Nor does Amazon have any representatives in New York soliciting sales on its behalf."

According to published reports, New York officials have mentioned Amazon as a particular target of the sales tax law because it is a large retailer that does a lot of business with residents of the state, but doesn't remit sales taxes to the state. The state expects the modified sales tax law to raise about $50 million in sales tax revenue that would otherwise not be collected for the remainder of the current fiscal year ending March 31, 2009, according to a spokesman for the state budget office. For the following full fiscal year, the tally is expected to reach $73 million.

Topic: Wholesale News

Related Articles: Amazon 

Article ID: 661

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