New York Requires Online Stores to Start Collecting Sales Tax

By Dave Wieneke | in Personal jurisdiction, Tax law | 2 Jun 2008 | 6 Comments

image: i love new yorkAs reported back in November, the State of New York is now requiring e-commerce sites “doing business in the state” to collect sales tax.

New Yorkers were previously required to pay sales tax, but previous court rulings had exempted out of state sites from being required to collect that tax, unless they had sufficient manpower or points of presence in New York to be considered to be conducting business there.

The new law classifies promotion of an online store through an affiliate web site based in New York as constituting a sufficient nexus for taxation. Although Amazon.com doesn’t have a store in New York, individuals and organizations in New York get revenue if they refer customers to Amazon. Legislators, in fact, referred to this as the “Amazon Tax”.

Not surprisingly, Amazon has filed suit, both claiming to have been unfairly singled out for taxation, and arguing the broader point that affiliate promotion isn’t a sufficient nexus to be subject to New York tax laws. Overstock.com has ended its relationship with 3,400 New York based affiliate sites, and filed a similar suit.

New York is now one of five states for which Amazon collects sales tax. Amazon has distribution centers in three of these: Kansas, Kentucky and North Dakota — and they are headquartered in the state of Washington. Amazon has no physical presence in New York state.

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