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

Effective June 1, Amazon will begin collecting sales tax on all items shipped to New York despite a pending lawsuit that challenges the state’s new law.

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.

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  • WyomingKnott
    And about time, too. This is not, IMNSHO, an Internet tax. The laws outside of the Internet are consistent: if you buy something from a company in one state and take it to your residence in another, you have to pay sales tax in the latter state. The fact that people were not paying sales tax on Internet purchases was in fact a violation of the law. Very picky New Yorkers could pay the owed sales tax with their state income taxes, but even if you wanted to it was a major hassle.
    The only real problem that I see with this is that now a vendor has to track sales tax in 50 states and so forth. Currently, a brick-and-mortal vendor only has to collect sales tax for one state.
    There is no new "Internet tax." This is simply a move to enforce existing tax laws - you buy something to use in New York, you pay New York sales taxes.
  • xxsk8er101xx
    it's illegal because New York would be taxing companies that do not reside in New York. It would be like California putting it's taxation onto you without California representation.

    That's how it's unconstitutional. The companies wouldn't get representation from New York but yet want the taxation from them? It'll illegal and won't last long in court. It will be struck down and New York will be forced to pay the taxes back.

    Your post is proof our education system is not just broken but non-existent.
  • Anonymous
    Sales taxs are state law. This is inner-state commerce, which is under the domain of the federal goverment. Only the federal goverment can collect taxes on this stuff.