Internet Lawyers Specializing in Website Agreements, E-Commerce Contracts & Internet Law: New York Legislature Passes “Amazon Tax” Bill into Law: Online retailers must begin collecting sales tax on purchases shipped to New York

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April 15, 2008


Can't believe it - hopefully it gets struck down soon. If it isn't watch the other states pile on.

New York Gov. David Paterson signed into law on April 15 a provision that will require out-of-state online retailers to collect state and local sales taxes. The measure, expected to raise about $50 million for the state budget, contradicts a 1992 Supreme Court Decision, Quill Corp. vs. North Dakota, that said states are not allowed to require out-of-state companies to collect sales taxes unless that company has a physical presence, such as a store, warehouse, in the state. A provision states that companies collecting less than $10,000 per year from New York residents will be exempt.

The big question is, will the law survive the imminent litigation? And, if so, will the other 44 states that have a state sales tax jump on the bandwagon? Before the ink on the bill had even dried, filed a suit challenging the new law, which 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, of course, has hundreds of thousands of affiliates, ranging from big publishers to tiny blogs, that feature links to its products. Amazon says that its affiliates are not agents but simply sites on which it places advertising. The commissions it pays the sites are simply one method of paying for those ads, it argued.

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