Internet Sales Tax
Internet retail giant Amazon.com has recently sued the state of New York over the state’s requirement that Amazon collect sales tax on purchases made by state residents and then turn the collected dollars over to the state’s revenue branch. Since Amazon does not have brick and mortar establishments in New York, they feel that they are exempt from the law. The state, however, sees it otherwise:
The law at issue took effect April 23, 2008, and requires that out-of-state Web retailers collect sales taxes from buyers in the state if the web retailers have NY State-based representatives referring business to them. According to NY, Amazon and like Internet retailers are subject to this law since they have "affiliate" marketing arrangements. In this law, an "affiliate" is defined as an entity that advertises Amazon on their website and then receives a sales commission when the referred visitor purchases something on Amazon.
According to Amazon, the law is actually a violation of the Constitution seeing as how the retailer does not posses a physical presence in the state. While the state believes any affiliates associated with Amazon in New York give them a presence, Amazon contends that "None of the in-state advertisers with whom Amazon has associated has ever been considered an employee, independent contractor, agent or other representative of Amazon under any provision of the tax law." The state again disagrees:
"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."
As more and more business turn to having a sole online presence, the law will have to be defined as just to what extent that “presence” may take.
Further reading:
International Herald Tribune
ComputerWorld.com
New York state budget press release
