Saul Hansell of the New York Times reports on a challenge to the state of New York’s attempt to extend its tax reach that is likely to have a big impact on the future of the Internet…
Before the ink on the bill has even dried, Amazon.com has filed a suit challenging New York State’s new law that forces online retailers to collect sales taxes on shipments to state residents.
On Friday, Amazon filed a complaint in New York Supreme Court in New York City, objecting to the law. The provision is meant to contribute about $50 million to the $122 billion budget that was passed by the state legislature April 9 and signed by Gov. David A. Paterson last week.
The issue isn’t whether people should pay taxes when they buy goods from out-of state sellers like Amazon, which is based in Seattle. For decades, New York and other states have required their residents to pay use tax — equivalent to sales tax — on out-of-state purchases for which sales tax wasn’t collected.
The question is whether the vendors must collect those taxes on behalf of the state. Generally, only those companies that have a physical presence, such as an office or store, in the state of the purchase are required to collect the taxes.
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. It says thousands of those have given an address in New York State, although it does not verify the addresses.