Amazon Sues New York Over Affiliates

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Amazon.com has filed a lawsuit that challenges New York State’s new law mandating that online retailers collect sales tax on Internet purchases by NY to state residents, according to Saul Hansell in the New York Times.

Amazon filed a complaint in State Supreme Court in Manhattan objecting to the new law.

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. This is an extension of an existing rule that companies employing independent agents or representatives to solicit business must collect taxes for the state.

Amazon’s suit challenges the constitutionality of this interpretation and seeks a declaratory judgment that it is invalid.

If you’d like to get some more background on this issue, check out my previous coverage:

• How the Spitzer Stole Christmas from Affiliates (November 2007)
• Oops!… Spitzer Did It Again (February 2008)
• Eliot Spitzer’s Legacy – Pimping Out of State Affiliate Sales (March 2008)
• Will Amazon Stop Working with NY Affiliates? (April 2008)

I love my Yankees and Jets, but this time I’m rooting against New York.