New York (NY) - A New York Supreme Court judge ruled yesterday that Amazon and Overstock must pay sales tax on sales conducted with residents living within the state of New York. The ruling comes following an 8-month case challenging a New York tax law called The Commission-Agent Provision.


A 1992 US Supreme Court decision stated that retailers did not need to collect taxes unless they have a physical presence in the state where customers reside. Clever New York lawmakers addressed that provision in their new law by relating it to marketers. Amazon.com maintains several New York-based non-Amazon affiliates who conduct business on the Amazon.com website.

Amazon claimed that the company itself did not have a sufficient presence in New York state to be compelled to collect and pay sales taxes. Judge Eileen Bransten's ruling disagreed, citing business transactions between Amazon.com and its New York affiliates.

In her decision, Judge Bransten wrote:

"In the end, the Commission-Agreement Provision does not broadly tax any and all Internet sales to New York consumers. It requires a substantial [presence] between an out-of-state seller and New York through a contract to pay commissions for referrals with a New York resident along with realization of more than $10,000 of revenue from New York sales earned through the arrangement. The neutral statute simply obligates out-of-state sellers to shoulder their fair share of the tax collection burden when using New Yorkers to earn profit from other New Yorkers."

It is likely both Amazon and Overstock will appeal this case. Since it involves constitutional issues relating to the the 14th amendment and due process, it could theoretically go all the way to the U.S. Supreme Court.

See TG Daily for other Internet sales tax news.

NY in money grab

Jan 13, 2009 17:08     

tax amazon, overstock.. fat food..drinks... NY and CA is quickly becoming a money grabbing state because they spend too much on welfares or stupid programs that they can't afford. Both state is like a person that keep spending on credit card and now try to find money to fill the hole they dig themselves into...
yo report abuse vote down vote up Votes: +5

Unfortunate for Those in New York and Amazon - Others May Follow

Jan 14, 2009 03:45     

Wow, that is unfortunate for those in New York and Amazon itself. I would agree too that sales tax is generally horrendously complicated when I worked with some people on back-end tax related operations for another e-commerce site. On the note about Amazon, I recently came across an interesting table that details the discounts on Amazon at http://www.uberi.com Maybe that will help some others.
john report abuse vote down vote up Votes: +0

And this surprises anybody?

Jan 14, 2009 06:22     

We've begun a new era where the accused rich are "confined" to there multimillion dollar homes, corrupt politicians go on with business as usual, and political appointees haven't paid their taxes in years. But that's OK, all us working class will keep paying, and paying, and paying! And let's not forget, you and I must show our eligibility to apply for a job, the elite needn't bother with such trivial details! And last but not least, our great judicial system in the United States. The court pass legislation on the bench. Other courts flat out ignore laws, even the constitution!

Tom EE report abuse vote down vote up Votes: +3

Re: NY in money grab

Jan 14, 2009 08:41     

It's a good point, that they're grabbing after money that they've otherwise lost because of online sales. On the other hand, states and cities -do- have to raise revenue through taxation in order to survive. Of course, raising income taxes by 10% would be highly unpopular and, worst of all, reveal to the average taxpayer exactly how much money the state is spending/wasting, and might thus curb enthusiasm for new expenditures. Couldn't have that, could we? :P

Steve report abuse vote down vote up Votes: +0

Horrible ruling

Jan 14, 2009 11:26     

I don't think NY understands what they are about to do. If this ruling stands, I could see Amazon not allowing affiliates in NY so they don't have to collect NY sales tax. So there will be a loss of jobs and income for NY. Good job NY lead the way. /s
headward report abuse vote down vote up Votes: +1

Great Decision

Jan 14, 2009 13:54     

States need to collect taxes to cover their expenses; everybody knows that. But at the same time, an even playing field is important. This move will result in either lost revenue for Amazon, should they keep their NY affiliates, or lost employment in New York, if Amazon drops said affiliates. Other online retailers have chosen to drop their affiliates so that they can retain the "advantage" of not being required to collect sales tax in New York. Whether this is a benefit or detrement to their profitability depends on many factors, but from a consumer standpoint it will definitely influence buyer shopping habits. Case in point: I recently searched for an item the price of which was equal on both Amazon and Newegg, but Newegg doesn't collect sales tax in NY. I'll let you take a guess as to which retailer I ultimately did business with...

accrajoe report abuse vote down vote up Votes: +1