Amazon has lost the latest round in its attempt to get the state of New York to back down on a new law requiring out-of-state online companies to collect sales tax from customers in the state. Sales tax collection in a state is generally required by companies with sufficient connection with that state – but just what constitutes a connection varies from state to state.
The new law applies to companies that don’t have offices in New York, but have sales of at least $10,000 in NY state and at least one person in the state who works as an online agent — someone who links to a Web site and receives commissions for related sales. The Amazon “Associates Program” allows individuals to earn income from Amazon by referring purchasers from their own websites to Amazon. It’s perhaps questionable whether this is an agency relationship, but the state court clearly considers that it is – at least, for the purposes of this law.
Amazon had claimed that the new law was overly broad and vague, and violated the commerce clause of the constitution because it imposes tax-collection obligations on out-of-state entities. They also considered that the law unfairly targetted Amazon, although they are not the only online vendor with a referrer program of this type.
Expect an appeal … overstock.com, which has lost a similar case in the state, has already announced plans to appeal its decision.