Seattle (WA) - Amazon.com has filed a lawsuit against the state of New York for passing a law that requires online stores to collect sales tax even if they have no brick-and-mortar counterpart.
The Seattle-based e-tailer calls the law "invalid, illegal, and unconstitutional," saying it violates equal protection clauses of US tax regulations.
Purchases made between two entities in different states have always been tax-free, including mail order purchases. With the boom of the Internet, though, lawmakers around the country have been fighting to make sales tax a requirement for any online sale that is made from a US customer to a US-based company.
It has been a logistical impossibility to pass any such law on a national scale because there are more than 7500 different tax jurisdictions throughout the United States.
However, any sale made from an online version of a local retail store is still taxed based on the buyter’s location. Some stores have bypassed this by outsourcing their online operations and thus not being legally connected to the brick-and-mortar stores.
In New York, this all hinged on a vague description that companies must collect tax from consumers if they "solicit business" in the state. The new law adds the refining characteristic of saying that tax must be collected if the business refers New York customers to its retail operation "directly or indirectly."
Amazon’s complaint is that the law "intentionally targets" its operation, noting that some have even called it the "Amazon tax." Also, one of the purposes of sales tax is to pay for local project, but Amazon says it "does not own, lease or otherwise occupy any physical property in the state, and none of its employees works or resides in the state."
The online retail giant has asked the New York State Department of Taxation for a response within the next few weeks.