Amazon Sues New York Over State Law on Collection of Sales Tax - The Diigo Meta page

• 02 May 08
  

  Daniel Andrlik

  This is going to be a big issue, especially as it involves regulation that is partially based on affiliate marketing. New York claims if any Amazon Associates (people who place Amazon ads or use referral links on their site) are residents of the state of New York, then Amazon must collect sales tax on behalf the state.
  
  Note that the issue of whether sales tax should be collected is not at issue here, what's at issue is if Amazon has to collect the additional sales tax, or if it is the responsibility of the consumer to report it on their state returns.
  
  As I mentioned above, what's interesting here is the use of Amazon's associate program as a method of establishing Amazon's legal presence in New York. At some point, affliate marketing is going to subject to some sort of regulation, and while that isn't the intrinsic goal of this law, it is certainly worth noting the legal system starting to take a closer look at how affiliate marketing works.

  marketing legal law business amazon

  • 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. 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.

    The company’s complaint argues that the statute is “overly broad and vague.” It is impossible, Amazon wrote, for it to determine which of its affiliates are actually in New York State.
  • And it further claims that the new rules violate the equal-protection clause of the Constitution because they specifically took aim at Amazon. “It was carefully crafted to increase state tax revenues by forcing Amazon to collect sales and use taxes,” the complaint says, noting that “state officials have described the statute as the ‘Amazon Tax.’ ”

  3 more annotations...

Would you like to comment?

Join Diigo for a free account, or sign in if you are already a member.