Amazon cries foul: e-tailer sues New York State over sales tax law

The online giant Amazon.com Inc. has filed a complaint with the Supreme Court of the State of New York saying it is unconstitutional to require e-tailers based outside of New York to collect the state's sales and uses taxes.

Amazon, which is based in Seattle, filed the complaint on Friday against the new law, which has been coined the Amazon tax since it was passed last month. According to Reuters, Amazon described the law as vague and overly broad.

The New York Times said that for decades New York and other states have required residents to pay use taxes on purchases made out of state for which no sales tax was collected. The question is whether the vendors must collect those taxes. At stake is what constitutes a presence in a state.

Amazon pays a commission to unaffiliated Web site operators from California to Connecticut. These sites range from well-known publishers to miniscule blogs. Frequently, the Amazon presence on the sites allows customers to click from the unaffiliated site directly to Amazon.com. If the unaffiliated site is based in New York State and provides a link to the e-tailer, the referral to that site qualifies as a physical presence for Amazon, according to the law. But Amazon says its affiliates are simply sites on which it advertises.

Amazon named New York Governor David Paterson and the commissioner of New York's State Department of Taxation and Finance as defendants in the case. The company is asking for the law to be declared invalid. It also requests being awarded the costs of the legal proceedings.

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