Seattle (WA) - Amazon.com has filed a lawsuit against the state of New York for passing a law that requires online stores to collect sales tax even if they have no brick-and-mortar counterpart.

The Seattle-based e-tailer calls the law "invalid, illegal, and unconstitutional," saying it violates equal protection clauses of US tax regulations.

Purchases made between two entities in different states have always been tax-free, including mail order purchases.  With the boom of the Internet, though, lawmakers around the country have been fighting to make sales tax a requirement for any online sale that is made from a US customer to a US-based company.

It has been a logistical impossibility to pass any such law on a national scale because there are more than 7500 different tax jurisdictions throughout the United States.

However, any sale made from an online version of a local retail store is still taxed based on the buyter's location.  Some stores have bypassed this by outsourcing their online operations and thus not being legally connected to the brick-and-mortar stores.

In New York, this all hinged on a vague description that companies must collect tax from consumers if they "solicit business" in the state.  The new law adds the refining characteristic of saying that tax must be collected if the business refers New York customers to its retail operation "directly or indirectly."

Amazon's complaint is that the law "intentionally targets" its operation, noting that some have even called it the "Amazon tax."  Also, one of the purposes of sales tax is to pay for local project, but Amazon says it "does not own, lease or otherwise occupy any physical property in the state, and none of its employees works or resides in the state."

The online retail giant has asked the New York State Department of Taxation for a response within the next few weeks.

Are New York Online Stores Affected?

May 02, 2008 12:11     

New York has been know for decades as THE place to Mail Order photography equipment. So this makes me wonder if those stores will now have to charge NY sales tax on all of their outgoing orders? Or if this is truly a protectionist tactic in favor of the local companies.
EEngineer report abuse vote down vote up Votes: +1

Go Amazon!

May 02, 2008 14:20     

I sure hope Amazon wins this one for consumers. Could you imagine what would happen if Amazon and other companies had to collect sales taxes for each of the 50 states? What a mess.
EndPCNoise report abuse vote down vote up Votes: +1

Good for Amazon!

May 03, 2008 11:09     

This New York law is horrible, and I believe it violates federal statutes and Supreme Court decisions. In passing the tax, New York State is effectively regulating interstate commerce, which is a power the Supreme Court has determined constitutionally belongs to Congress. The law generates extreme headaches for anyone attempting to do business with the State of New York or people residing within. If New York wants the money that badly, they can shift their sales tax to a use tax on their population. Tax revenues stay the same, but the incidence of the tax lies completely within the New York State, which eliminates the constitutional objection and the headaches for retailers everywhere. Sure, people in New York would have an extra step in filing their state taxes every year, but seeing as how I already have to do the same thing here in Massachusetts, I won't feel any pity for them.

Andrew report abuse vote down vote up Votes: +0

Damn i live in ny

May 03, 2008 22:44     

i hope this doesn't hold up...
Kyle report abuse vote down vote up Votes: +0