Amazon.com has filed a lawsuit against the state of New York over a new law that requires certain online retailers to collect taxes from consumers residing in the state and then remit them to the state.
Amazon, which filed the complaint on April 25, has asked the New York State Supreme Court to declare that the law is "invalid, illegal and unconstitutional."
Thomas Bergin, spokesman for the New York State Department of Taxation and Finance, declined to comment on the lawsuit. Amazon did not respond to a request for comment.
Several weeks ago, the state passed a law as part of the its budget that requires Internet companies with some kind of physical presence in the state to sign on as vendors by June 1, collect state taxes from New York customers and remit them to the state.
Amazon itself doesn't have a brick-and-mortar store in the state and therefore is not required to collect state taxes under a 1992 US Supreme Court ruling. However in the eyes of the state, the online company does have a physical presence because it operates through a number of local affiliates. According to the state, if local companies put Amazon's affiliate code on their Web sites, then Amazon does, in fact, have a physical presence in New York. Affiliates make money by referring customers to Amazon.
New York residents are already required to pay sales taxes, which they can do on their state income tax returns, on items they purchase from out-of-state companies.
In its complaint, Amazon said New York has long required vendors that "solicit business" in the state to collect and pay New York sales and use taxes. However, the state had never imposed this tax-collection obligation on out-of-state retailers, such as Amazon, with no physical presence in New York and no in-state representatives soliciting sales on behalf of the retailers, Amazon said.
But the new law presumes a retailer "solicits" business in the state if any in-state entity is compensated for directly or indirectly referring customers to the retailer, Amazon said in the lawsuit.
"Because some independently operated, New York-based Web sites post advertisements with links to Amazon and are compensated for these advertisements, Amazon is now presumed to have engaged in solicitation under this statute and, thus, must collect New York sales and use taxes on all of its sales to New Yorkers or face hefty civil and criminal penalties - despite the fact that Amazon lacks any physical presence in New York and that no solicitation by Amazon actually exists," the lawsuit states.
Amazon's lawsuit also claims the new law violates the due process clauses of the US and New York Constitutions because it imposes tax-collection obligations on out-of-state online retailers that don't have a substantial physical presence in the state. Amazon also said the statute violates the equal protection clauses of the US and New York Constitutions because it intentionally targets Amazon. According to the lawsuit, "state officials have described the statute as the 'Amazon tax.'"
Additionally, Amazon said the law is vague and overly broad because Amazon has no way of knowing whether its affiliates, who provide addresses in other states, are legal residents of New York.
In its complaint, Amazon is requiring the New York State Department of Taxation and Finance to file its response with the court within 20 to 30 days.