May 3, 2008 5:14 am US/Central
Amazon Sues NY Over Internet Sales Tax Collection
ALBANY, N.Y. (AP) ―
Amazon.com is suing New York over a new law that requires out-of-state online companies to collect sales tax from shoppers in New York.
"We are challenging the constitutionality of the recently enacted legislation in New York," Amazon spokeswoman Patricia Smith said.
Officials estimated the state would gain about $50 million by requiring Internet giants such as Amazon.com to collect state sales tax. New Yorkers are currently on an honor system to report their online spending when they file state tax returns.
The state Legislature and Gov. David Paterson passed the law as part of the 2008-2009 budget. It applies to companies that don't have a brick-and-mortar presence in New York but have at least one person in the state who works as an online agent -- basically someone who links to a Web site and receives commissions for related sales.
The suit argues the change unfairly targets Amazon, is overly broad and vague, and violates the commerce clause of the constitution because it imposes tax-collection obligations on out-of-state entities.
The suit also argues that the people linking to Amazon products are not agents, but are simply paid by the company for advertising. Hundreds of thousands of Web sites advertise for Amazon. New York now considers anyone who runs one of those sites from within the state an agent for Amazon.
New York state has argued that the law closes a "tax loophole."
Tom Bergin, a spokesman for the state Department of Taxation and Finance, said the change is a necessary update for modern times.
"Everyone in New York state either pays sales tax on articles that they buy or is required to pay sales tax on articles that they buy," he said. "This is not a new law, this is just amending the law to bring some of the new technology -- the Internet -- into compliance."
Bergin would not comment on the lawsuit.
Businesses with a physical presence in New York already collect the state sales tax on online purchases. The proposed law would apply to
companies that have $10,000 or more in New York sales.
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