Amazon has filed a complaint in NY’s State Supreme Court challenging a new law that forces the retailer to collect sales tax on shipments to residents of NY state.
The New York Times explains:
The issue is not whether people should pay tax when they buy goods from out-of-state sellers like Amazon. For decades, the state has required them to pay sales or use tax.
The question is whether the vendors must collect that tax on behalf of the state. Generally, only those companies that have a physical presence — like an office or store — in the state where the purchase is made are required to collect the tax.
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. The state law says that thousands of those have given an address in New York State, although the addresses have not been verified.
The law says that if even one of those affiliates is in New York State, Amazon must collect sales tax on everything sold in the state, even if it is not sold through the affiliate.
Amazon is challenging the constitutionality of this interpretation of the law and claims that the statue is “overly broad and vague,” says the Times. They also claim that the law is unconstitutional because it was written specifically for Amazon, thus violating the 14th amendment.
Amazon Sues Over State Law on Collection of Sales Tax [NYT]
(Photo: Guillermo Esteves )
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@Buran: I’ll concede to your statement, but add, that republicans, if acting like republicans, would not be behind this.
Unfortunately politicians lose their way and do not uphold the morals of their party. Less Taxes is at the very base of the republican party, and any increase in tax, goes against party values in my opinion. A lot of republicans follow this, a lot dont.
@Bladefist: It’s awfully convenient how you lump all Democrats together, but then claim that any Republican who doesn’t agree with you isn’t a “real Republican” and doesn’t count…
@dabub: Oh, thanks for rubbin that in my FACE, haha. Sorry, I live approximately 3.5 hours from the closest Jersey line (Adirondacks, here)
But the next time I visit family on the island, I’ll make sure to take ya up on that offer!
Totally Expected. I hope Amazon wins this one.
It’s another one of New York’s silly ideas, like the Congestion Pricing in NYC. Keep this up New York and our 20 year relationship will be finally be over.
This will be fun I tell you what. I knew it’s been too long since the Supreme Court’s case of Quill Corp v North Dakota went down in 1992. I knew there had to be another state to take this on sooner or later. I figure it had to be one of the big ones if they were going to be successful this time. I’m surprised California didn’t take the lead on this one. Sending in North Dakota on this battle in 1992 by the states is like making your retarded cousin taste the expired milk to see if it has soured. This case will undoubtedly go to the Supreme Court and set precedent for every other state that holds to ND v Quill related to sales and use tax laws. If the Supremes rule in favor for the Empire every other state will back up money truck at online retailers all over the country asking for their share.
The other alternative would be for the states to start requesting the sales records of each Internet company and start sending out bills directly to taxpayers. I’m not sure if I really want the state to have official record of my purchases all in the name of collecting tax. The nice thing that in CA and in a handful of other states it is the responsibility of the last seller to collect the tax and if they didn’t the state does not go after the end user but in most other states they go after whoever they can. I had to deal with NY several times and they have no mercy.
This has to be a tough spot for Amazon is in at the moment. If you don’t collect the tax you get dinged by the states but if you collect too much from your customers that opens up a annoying class action lawsuit on them. In reality it would not be too difficult for Amazaon to collect and remit the sales tax on behalf of their customers to the state but I’m sure they don’t want to lose that competitive edge they’ve created over the past several years concerning their affilates. Borders.com was brought down in flames by the State of California Board of Equalization which prompted the Michigan based retailer to partner with Amazon to sheid themselves from their sales tax liability obligations across the country.
Borders tried the ole let’s set up a seperate legal entity so therefore these are unrelated companies where the online retailer has no nexus. Their grand plan failed when the brick and morter Borders started to take back books from the online store acting like they were the same company. Opps. Other smaller retailers have learned from that and have done the same thing but insist that online sales must be returned to the online retailer. Great idea but a few states said nope, try again, saying that because of intelectual property existing within the state was enough to gain someone a hot plate of South Carolina Nexus.
My understanding of Quill was the decision of sales taxes on interstate transactions was left to the Congress and as Congress had not implemented such laws the Quill decision would stand.
In other words the Supreme Court left the door open for the opportunity to tax these sales, Congress has been slow to do so.
Ultimately the needs of the states will eventually win this battle.
One proposal floating around is to tax goods based upon the point of origin regardless of destination Ship from Alabama to New York, pay Alabama sales tax.
There are some states are opposed to that proposal as they only get to tax the goods that leave their state. A small, lightly populated state with few business engaged in internet/ mail-order sales, or a state without a sales tax would be tax deficient compared to other states.
All things considered, Congress is going to act in favor of the states.
Oh wow I just now finally just figured out the Amazon logo, thank you consumerist. It’s not just a smile, it’s A to Z…ahh I feel better.
@StevenJohn: Sorry to geek out more Congress has refused to get involved in diving into state and local politics. The last thing we need is a national sales tax on top of all of the other federal taxes we pay.
Also Congress has been waiting to see what happens with the Streamline Sales Tax Project. It’s not going as well as the original framers of that movement would have imagined. It’s been the big retailers like Wal-Mart and Target that have taken the lead in making sure that project doesn’t die and get all of the states to play along to simplify the entire sales and use tax process.
As far as destination based taxation is concerned I believe that is a bad idea and goes against why sales taxes were implimented in the first place. Sales taxes are collected for the benefit for those that pay them in thier local communities. If you switch to a desitnation based tax system many states, counties, cities and taxing disctricts will suffer greatly. That’s been one of the big sticking points for SSTP.
We really need to make sure Congress does not get involved in this game. We’ll be paying a GST and PST type tax in no time flat.
@Bladefist: BWAAA, HAHAHAHAHAHAHA!!!
Know any “real Scotsmen,” while you’re at it?
@tande
Im confused. I thought NY was telling New Yorkers that if they bought something online from Kansas that they ( the New Yorker) had to pay a tax on it. (I think we agree there)
Now NY is asking Amazon to collect the tax for NY. So Amazon is suing them to stop.
What argument does Amazon have for not collecting the tax other than the fact that NY can not tax Kansas purchases or ask Kansas stores to tax goods for them. Except maybe that Kansas is not in NY’s jurisdiction?
@Orv: Republican is something you can look up, and find the ideals on. It’s researchable.
If you have a republican who wants to raise taxes, then you have someone going against the code. That’s like saying your Christian, but you dont believe in Jesus.
@aront: Barnes and Noble collect the taxes. IBM collects the taxes. What’s going to happen? They’ll collect the taxes.
Sellers in the market place on Amazon include NY residents. Amazon will probably loose this case.
lol I think it’s funny that people still don’t realize the only reason the internet isn’t taxed is because of it can’t or shouldn’t be… it’s not taxed because of republicans.
GO OBAMA GO HILLARY RIGHT???? BUSH SUCKS!!!
Well come this fall, depending on who wins, is whether or not we will see internet tax throughout the US within the first couple of years.
if the only reason why e-commerce exist is because of tax evasion, it deserves to die…
however, get off your soapbox and quit being ignorant… do you realize how much it costs to operate a brick and mortar store???
IANAL but IIRC, there is precedent for this in professional sports. NFL players are paid by the game, and they have to pay income tax in states and cities where they play.
Why isn’t Amazon suing in federal court?
Living in NYC sucks!!!!
A pack of cigs will soon cost $7.50+
The Gov needs more money…add a extra tax to all these “tourists” from the UK and Japan that come into NY to take advantage of our weak dollar…there are thousands of them spending major bucks, a little more from them won’t kill the golden goose.
I don’t think many of you are aware of, or paying attention to, the fact that residents in most (all?) states (including NY) are required to pay an equivalent to sales tax on purchases they make online or otherwise untaxable purchases made out of state. That’s what use tax is.
This isn’t a new tax or “another” tax; it’s an attempt to enforce a virtually unenforcable, but already existing tax.
Consumerist, is it time for a “tax evaders” tag to supplement the “bad consumer” tag?
Good luck Amazon, let’s set a good precedent here.
@Byzantine:
Can you imaging how much it would cost to ship all those lawyers out to wherever those courts are? Even with Prime shipping.
…and I’m done!
@Skiffer: Thanks for clarifying, I meant that HAHA! Just a lil crazy thinking about $4.00/gallon gas…
can’t sleep, taxes will eat me….
I think some legislators wanted to increase state revenue and looked at the nation’s largest online retailer. Affiliates are not stores or salesmen, they’re just websites, so it shouldn’t matter where they are located. If Amazon started collecting taxes everywhere their value proposition would tumble and that, combined with waiting for and the cost of shipping would put them out of business. And then revenue for FedEx and UPS would fall damaging the nation’s economy even further. Thanks NY being the cause of this country’s demise.
@Byzantine: Because this is not a federal tax issue it is a state and local tax issue. You may say that because they are arguing about the whole 14th amendment and all which is a federal issue. They will first try to get the state count to hold to their position that the STATE law is vague and therefore not valid under state laws. If the court find for the state then the next logical step would be to take this to federal court which will then lead this up to the Supreme Court who will rule on the matter and the issue’s conclusion.
Patience young grasshopper, this is not the last we’ll hear about this one anytime soon. I’m geeking out over this thing and can’t wait to hear all of the arguments over the next several months if not years.
The U.S. really just needs to adopt a standard Value Added Tax system like just about every other developed country in the world. Unless the sales tax is eliminated, if you buy something, you should pay tax on it. No skirting the law through these interstate commerce loopholes. It’s offensive that so many people on this thread are proud of their apparent disregard for the law and tax-dodging.
Obviously no one wants to pay more than they have to, but if you don’t want a sales tax, then you need to get rid of it through political means.
Also to those of you whining and complaining about a mere 8% sales tax, get over yourselves. Most of the rest of the world pay 15-20% tax and are doing much better as a result. The U.S. has some of the lowest taxes in the world, I’m so sick of people complaining about it! It’s no wonder the country is going down the tubes.
Actually we all can move to a state with Zippo sales tax to avoid this little sales tax problem. I believe there are 7 such states without a sales tax.
Don’t worry, those states still get their’s. Toll roads combined with higher car tags, income and property taxes do quite well to offset for the lack of a sales tax.
@arcticJKL: “Now NY is asking Amazon to collect the tax for NY. So Amazon is suing them to stop. What argument does Amazon have for not collecting the tax…?”
The problem is what happens when all the states ask Amazon (or any other online seller) to collect the taxes. There are different rates for different items in different counties of different states. There are thousands of things to keep track of.
Keeping track of all of that would be a huge and expensive undertaking and would kill a lot of smaller sellers.
The original supreme court verdict was based on the notion that states requiring vendors to collect taxes would represent an unfair burden and that’s exactly what it would be.
Create a simple, uniform way to apply sales tax and there’s no problem. But as things are, we cannot have states requiring online and mail-order sellers to be their tax collectors.
@plustax: I don’t think it should be in federal court because I thought it was a federal tax issue.
This is a diversity issue. NY state is trying to apply a tax to sales through a company who has a principal place of business somewhere else.
Thank god I live in oregon where theres no sales tax.
@Applekid: Hey, don’t lump me in with those people. I was just being sarcastic.
Thank you Amazon!