Despite filing a lawsuit to challenge a new law requiring websites that use affiliates based in NY (like Amazon) to collect sales tax from their NY customers, Amazon has registered with the state and is now collecting sales tax. Electronics retailer Newegg also began collecting tax from NY customers.

The NYT explains:

In April, as part of its 2008-2009 budget, the state legislature passed what is being called the “Amazon Tax.” What’s new isn’t actually a change in the law—New York residents always owed tax on their purchases—it is an expansion of the law that is meant to force online retailers to collect the tax and send it to New York. Any company with physical operations in the state—such a store or office—already collects tax for the state.

Indeed, the state calculates that of the nation’s top 20 online retailers, 18 had already been collecting tax because they, like Dell and Staples, had operations in the state. The remaining two—Amazon and Newegg.com—have now registered to collect taxes.

The state now says tax must be collected by any online store that gets customers referred to them by Web sites based in the state.

Amazon’s lawsuit is making its way through the courts, but a provision exempting them from retroactively owing tax on all prior purchases by NY customers if they signed up by June 1st forced the retailer to start collecting the tax. Overstock dropped all its NY affiliates and will not be collecting tax.

We suspect Overstock is going to get a lot more popular with New Yorkers pretty soon…

Let the Tax Collection Begin [NYT]
(Photo: Tom Simpson )

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