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May 02, 2008
Amazon.com Seeks Relief from "Overly Broad and Vague" New York Law
By Michael Dinan TMCnet Editor An e-commerce giant is challenging a New York state law that forces online retailers to collect sales tax on shipments to residents in the state.
The move raises questions about whether Internet-based companies can be viewed as having a physical presence in states just because some businesses have Web sites that feature links to the companies’ products.
Amazon’s suit, filed today in state Supreme Court in Manhattan, claims that an interpretation of a new law that finds such a physical presence for Amazon in New York is unconstitutional.
The new law is “overly broad and vague,” according to Amazon’s complaint.
The law in question was signed last week by New York Gov. David A. Paterson, as part of a $122 billion state budget.
Amazon isn’t questioning whether people should pay tax when they buy goods from out-of-state.
But the company objects to a requirement that it collect the tax on the state’s behalf. The new law that Amazon is challenging appears to include the e-commerce company as part of a new definition for what qualifies as having a presence in New York. Under the law, any Web site based in New York that earns a referral fee for sending customers to an online retailer would qualify. Hundreds of thousands of Amazon affiliates include links to the Web site’s products.
Amazon also claims that by specifically targeting the company, the new rules violate its Constitutional equal-protection rights.
“It was carefully crafted to increase state tax revenues by forcing Amazon to collect sales and use tax,” the complaint says.
The new law is expected to generate about $50 million for New York.
A New York State Department of Taxation spokesman could not be reached for comment.
Michael Dinan is a TMCNet Editor. To read more of his articles, please visit his columnist page.
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