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Amazon Will Collect Sales Tax in NY; Competitors Axe NY Affiliates

Earlier this year, New York enacted a new law that will require companies with affiliates in the state that direct or help refer business is required to collect sales tax from state residents. Amazon filed suit against the state last month in effort to reverse the new law, deemed by Amazon as “unconstitutional.” According to Amazon’s website, “Amazon has filed a lawsuit challenging the constitutionality of this provision. However, as required by the law, we must still begin collecting New York sales tax beginning on that date.”

“Nothing is changing with regard to Amazon’s relationships with Affiliates in New York state,” said Patty Smith, Amazon spokeswoman. As of right now, it appears Amazon may be the only one abiding by New York’s new law, unlike some competitors.

Overstock, an online outlet store, will be axing its New York affiliates to avoid collecting taxes. An estimated 3,400 affiliates will be cut off, as the company cites financial reasons as the cause. “There are affiliates in New York who will see their business go away because of a not-so-thoughtful action by the New York State legislature,” said Jonathan Johnson, Overstock senior vice president of corporate affairs.

Johnson added, “We believe the law is unconstitutional and won’t stand the test of the courts, but in the meantime we have been very careful to keep our footprint just in Utah. We can’t afford to have our New York affiliates up online if it subjects us to New York sales taxes.”

New York original hoped the new law would assist in generating over $50 million a year. Earlier this week, the state of Texas began an investigation of Amazon for back taxes the company may owe to the state, as Amazon has been operating a distribution center in the state since 2006.