New Tax Law Causes Amazon.com to Sue State of New York

The state of New York recently passed new tax law legislation requiring out of state retailers doing $10,000 or more in sales in the state through affiliates, to collect sales tax. The collection of sales tax and remittance to the state is to begin June 1, 2008. Sales tax for state, county, and local districts averages eight percent.

Amazon.com has been mentioned by state officials in press releases because it is one of the largest retailers who do not currently remit sales taxes to the state. New York officials estimate the new legislation will raise about $73 million dollars per year. ECommerce retailers based outside of the state of New York have traditionally been exempt from the collection of sales taxes on purchases made by New York residents. The newly amended law now states that retailers who do more than $10,000 in sales in the state, have a nexus, if those sales are produced through affiliate web sites that are based in New York.

Amazon.com has filed suit in the state’s Supreme Court to overturn the new law. The new legislation would require Amazon.com and other out of state retailers to collect and pay sales taxes on purchases made by New York residents. Other states are monitoring this battle as they look to implement similar legislation to help offset state budget deficits. If the law is upheld, it would adversely affect existing affiliate marketing agreements for all Ecommerce companies. Out of state Ecommerce retailers would have to either comply with the new law and begin remitting sales tax to the state or end their affiliate programs with companies located in the state.