Amazon Challenges “Amazon Tax”

Amazon has filed a lawsuit in a New York state trial court challenging New York’s recent law requiring Internet retailers to collect and remit sales taxes on sales to New York residents. According to an article in today’s NY Times the New York law redefines the nexus–the in-state presence–required for an out-of-state retailer to be liable for collecting and remitting sales taxes by “includ[ing] any Web site based in the state that earns a referral fee for sending customers to an online retailer.” In other words those New York-based websites that link to Amazon’s goods create the 21st century equivalent to a sales force traveling the hinterlands to drum up sales. The Times article reports that Amazon is challenging the constitutionality of the law, presumably on due process and commerce clause grounds but also as a violation of the 14h Amendment’s equal protection clause. Its complaint alleges that the law is known as the “Amazon Tax” and” was carefully crafted to increase state tax revenues by forcing Amazon to collect sales and use taxes.”

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This was written by David Randall. Posted on Friday, May 2, 2008, at 3:02 pm. Filed under eCommerce. Tagged amazon, Internet retailers, nexus, sales and use taxes. Bookmark the permalink. Follow comments here with the RSS feed. Post a comment or leave a trackback.

4 Comments

JesseR wrote:

NY is too afraid to tax consumers directly with a sensible ‘Congestion Charge,’ but they have no problem forcing Amazon.com (and other retailers) to collect taxes for them. Quite pathetic - Amazon should fight this tooth and nail.

Friday, May 2, 2008 at 3:29 pm | Permalink
Howe Lin wrote:

Depending on the details of new law, NY may possibly have a strong defense, as along as it can show its redefinition of a nexus portrays substantial activity in its state, is fair, and does not burden against interstate commerce. If Amazon receives a reasonable amount of money in referral fees through NY, then Amazon should have to collect taxes to compensate for the benefit of doing business in NY.

Saturday, May 3, 2008 at 11:48 am | Permalink
Paul Garfinkle wrote:

I think that Amazon should be forced to pay sales tax to items sold to NY residents. This scenario is similiar to the Borders Online v State Board of Equalization case in which cashiers acted as agents for Borders Online in accepting returned merchandise. Since Amazon receives referrals from NY based websites, they should be forced to pay NY sales taxes.

Sunday, May 4, 2008 at 9:54 pm | Permalink
Geetika wrote:

I feel like the obligation of informing the customer of whether he/she is required to pay tax on a particular item is necessary. And, obligating the collection of tax by out of state entities will just ensure its collection and reduce the workload of the state govt. It seems like an extension of the law in existence and should not face much retaliation, except from businesses like Amazon, which is quite obvious as they are greatly affected by it due to the large proportion of business they get through reference fees. However, Amazon might have a strong point there because it might be hard to prove the actual physical presence of its agents.

Monday, May 5, 2008 at 12:40 am | Permalink

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