Amazon Sues Over Law That Forces Them To Collect NY Sales Tax
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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I sure hope the Amazon wins.
Sorry, New York, I know you guys think you're the center of the universe and all, but believe it or not, you have no power to regulate interstate commerce.
My God, the implications if they lose. It's not just a New York issue.
Ditto, but expect to see more insane interpretations of the Interstate Commerce clause.
South Dakota thought they were going to do this too until they remembered the entire state only has 750,000 people.
It is a horribly written law that will never fly.
@speedwell: Oh yeah, this is the pebble that will bring on the landslide. States are so broke at this point that they'll try anything to get some jack into the coffers. Desperate times.
I hope that Amazon prevails.
Way to go, Amazon!
Actually the law was written for ANY online company that sells more than $10k into the state and uses affiliates to generate those sales.
Amazon is the biggest fish in that pond, but they are not the only fish in that pond. Bottom line, the law was not written specifically against Amazon.
I hope Amazon wins on this one as well. NY State's basically said word-of-mouth now constitutes having a full business presence. Scary.
Ugh, we had a somewhat similar situation with one of our clients, but on a much smaller scale. They delivered maybe one shipment a year into a city. The city had hired a firm that tracked down people and companies that owed them money. This company went after our client for about $3k in fees for doing business in that city without having a business permit from that city.
We ended up settling for a much smaller amount, but our client will never do any kind of business in that city again.
Dammit I love Amazon!
Stupid logic on NY parts....if this passes, what about all eBay sales?
This is going to hurt NY more than it will help them.
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.
Yes, although in practice there's no way to enforce this tax. Michigan had it too, when I lived there, and literally almost no one paid it. It has to be the most widely flaunted tax in existence.
@HeartBurnKid: umm, this has nothing to do with new yorkers, amazon is bringing the issue. and they are basing it on Equal Protection since its only aimed at amazon. it has nothing to do with (your) perceived elitism of new yorkers.
@HeartBurnKid: What part of this has anything to do with regulating interstate commerce?
It's purely an administrative (i.e., financial burden) issue.
Another tax for us? Dammit.
Generally, don't mind paying taxes, but this is a little below the belt. Isn't it bad enough we pay the highest Gas Tax in the WHOLE United States?!?
Go amazon go!
@differcult: that's what i was thinking & that's why i believe ny should lose. if amazon can prove that other merchants are still not liable for collecting taxes, then ny would by violating equal protection.
So if Amazon loses, what happens when every state creates a law like this? Will Amazon have to collect sales tax for every state for every purchase bringing the total purchase to astronomical heights and thus putting Amazon out of business?
Wow.
Another example of an American government overstepping its bounds and crippling big business.
@verucalise: Again, people - it's not about imposing another tax!! You are still supposed to pay sales tax on all online purchases, for pretty much every state - it's just called use tax instead of sales tax.
Now granted, no one ever pays it and it's pretty much unenforceable - but please don't laud Amazon for facilitating your own tax evasion.
I almost think that this deserves a "Help Amazon Give NY the Finger" legal fund. I would donate a few bucks...
@aront: I agree. But we're talking about New York here, so I mean, no surprise here. Liberals want their taxes anyway they can get them.
Whats going to happen if Amazon loses is, Amazon is just going to lose a lot of NY business. The government isn't going to take in much revenue, and is just going to punish Amazon for being a retail store.
If I was Jeff Bezos, I'd block all NY IPs. lol. Ok no I wouldn't, but that would be hilarious.
@ Skiffer is right, there is a line on every state form asking for you to voluntarily pay sales tax on Out of State purchases. Which no one does. Which has led to less sales tax collected by states. Which has led to states tryinf anything, including this law suit, to get mo sales tax. I predict it will get worse.
Amen to that. They can take their high taxes, unreasonable fines and fees and crap they levy on people that live there, and shove 'em.
@Skiffer
New York is trying to tax sales that take place in other states and/or that crosses state lines - hence interstate commerce.
@Saboth: Double Amen. Wasn't it a US Supreme Court justice who once said Americans have a civic duty to pay as little tax as they legally can? "Legally," in this case, I read as marching on fricking New York with pitchforks if it looks like Amazon is losing.
@arcticJKL: No, NY is trying to shift the the burden of collecting and reporting only from the consumer to the vendor. The consumer always "pays" the tax. The question is who reports it.
New York consumers are always "required" to pay the tax. They recieved the property in that state. They aren't sales taking place in other states.
I wonder why they are not going after the other online retail behemoths like newegg, buy and overstock.
It does look a little targeted to me.
@twiddling_my_thumbs: the state member who is in charge of this must have gotten an xbox game in a huge box from amazon.
@Bladefist: Make that "governments" instead of "liberals" and I'm with you, but as-is it's just a partisan bash-fest.
Interpretation is a bitch. Them bitches can read it to say whatever they want.
You know, it would be pretty easy for just about any state to use the affilate program loop hole.
Target would get just about every state out there wouldn't it. See thats where I think that the NY law isn't that flawed.
I buy a book, cd, movie, from amazon. No tax.
I buy a book, cd, movie from Target.com who uses Amazon.com to fill and ship their orders. Tax.
I think that the internet, much, much more the catalog sales require a re-examination from the supreme court on what counts as nexus.
Many states are entering into agreements to require all online purchases be charged the appropriate sales tax, thanks to the voluntary invlolvement of the major CC companies. After all, the CC companies receive a percentage of the total sales transaction amount.
I agree with Amazon. I much prefer the self-reporting system that is in place currently, where those of us who are law-abiding citizens report ourselves and send off a check to our state revenue department each year.
@aront: Not only if Amazon now had to collect and process sales tax for every state but every small online retailer would have to.
The burden it would create for a small sometimes one person online presence is astronomical. Many states require paperwork and funds be filed every 30 days. Some states also have city taxes mixed in so now you have to figure the city tax for every single sale also. Just in SD we have pages of two horse towns that all have a different city tax rate.
Amazon has a good case on their hands. I sure do hope their lawyers are up to snuff.
@verucalise: But you can go across the border and fill up in NJ with the lowest gas prices in the US! Full service too!
@aront: No, only for the state it's being purchased in, and possibly the state it's being purchased from. That's two taxes, which essentially adds to a sales tax and a use tax, which many, if not all states already levy on goods. I buy a harmonica in GA, then take it home to MA. I pay sales tax in GA, and use tax (if I report it) in MA.
@chrisjames: In most states use tax only applies if you didn't pay sales tax on the original purchase. I don't know how it works in MA, precisely, but in MI if I bought it in a state that charges a sales tax equal to or higher than Michigan's, I don't owe squat. This is for retail items. I think it's a little different for titled assets like cars and airplanes.
The reason for laws like this, besides recovering lost revenue, is otherwise local businesses are put at a disadvantage. Why would I buy something locally and pay sales tax if I could mail order it tax free?
@Daniel-Bham: So that'd be, I suppose, you and three other people? :)
Shirking taxes is the American way after all.
@Orv:
"Why would I buy something locally and pay sales tax if I could mail order it tax free?"
Well the usual response to this would be: Because you have to pay shipping to mail order something and that is usually around the same amount as the tax. Sometimes more, sometimes less.
@Orv: I don't know about MA, it was just an example. Looking it up it says use tax is levied on all goods brought into the state, but the amount of sales tax paid in other states is deductible. The definition of use tax is just a tax levied on items used within the state of residence when no sales tax is paid to the state of residence.
@Orv = "Why would I buy something locally and pay sales tax if I could mail order it tax free?"
Because of a local store's superior service?
FYI--I have an Op-Ed on this in today's Newsday:
The law isn't only targeted at Amazon; it targets all online retailers who use affiliate programs and have quarterly sales of greater than 10,000. You can actually read the text of the law here:
The relevant part is Part M, on page 32 of the text. Oh, and you can find Amazon's complaint at:
{ProfJonathan}
I hate tax-happy New York. First we get hosed on gas prices, and now they're taking over interstate commerce. Sales tax is 8% here, which is utterly ridiculous.
@HeartBurnKid: I don't think New York is disputing that. However, they are missing out on a large part of the tax income which without the internet they would have otherwise collected (people would have bought more books from in-state brick and mortar stores). Having realized that, and being in a pinch, they are testing out the possibility that this ISN'T interstate commerce. After all, Amazon has thousands of paid agents with New York registered as their place of business.
If I were Amazon, I would have simply required that all of my affiliates not have a New York address. Sure, there would be some brief hiccups, but I'm sure mail-forwarding services exist, and Amazon does not want to risk a loss here.
Recently a NC boating company had a truck transporting boats to a destination in Maine was detained. There was an outstanding tax lien against the company which claimed that the owners owed sales tax because of dealerships in NJ selling their product. They held the truck and load hostage on the weekend until the company forwarded a cashiers check for the total amount due.
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@Applekid: Very few people are willing to pay extra for service. Most people shop only on price.
@dreamcatcher2: That would be tough, since Borders is an Amazon affiliate, and Borders is primarily a brick-and-mortar retailer.
damn right