Tax News

CCH (cch.taxgroup.com) reports:

  Amazon.com has filed a lawsuit in New York Supreme Court, New York County, challenging the constitutionality of a recently enacted New York statutory provision that requires out-of-state Internet retailers with no physical presence in New York to collect New York sales and use taxes. (TAXDAY, 2008/04/25, S.15) Specifically, the new statute presumes a retailer "solicits" business in New York if any in-state entity is compensated for directly or indirectly referring customers to the retailer. In its complaint, Amazon alleges that because some independently operated, New York-based Web sites post advertisements with links to Amazon and are compensated for these advertisements, Amazon will now be presumed to have engaged in "solicitation" under this statute. As a result, Amazon contends that it must collect New York sales and use taxes on all of its sales to New York residents or face civil and criminal penalties, despite the fact that it lacks any physical presence in New York and that no solicitation by it actually exists. Therefore, Amazon seeks a declaratory judgment that the new statutory provision is invalid, illegal, and unconstitutional (facially and as applied to Amazon) on the grounds that:

  -- it violates the Commerce Clause of the U.S. Constitution because it imposes tax-collection obligations on out-of-state entities such as Amazon who have no substantial nexus with New York;

  -- it violates the Due Process Clauses of the U.S. and New York Constitutions in that it effectively creates an irrebuttable presumption of "solicitation" and is overly broad and vague; and

  -- it violates the Equal Protection Clauses of the U.S. and New York Constitutions because it intentionally targets Amazon.

  Subscribers to CCH Tax Research NetWork can view the complaint.

Amazon.com, LLC v. New York Department of Taxation and Finance, New York Supreme Court, New York County, No. 08601247, complaint filed April 25, 2008.