Amazon loses New York sales tax lawsuit

A New York state judge has dismissed Amazon.com's lawsuit alleging the online retail giant had no requirement to pay sales tax in the state due to a lack of physical presence.

Last July, Amazon.com Inc. 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.

New York State Supreme Court Justice Eileen Bransten said that New York law requires companies to collect state and local sales taxes if the company generates $10,000 or more in revenue as a result of commissions paid to persons in New York for sales referrals, The Wall Street Journal reported. Justice Bransten wrote that, "There is no basis upon which Amazon can prevail."

Although Amazon has no physical presence in New York, the company, through its "Associates Program," pays unaffiliated Web site operators across the country a commission if they advertise Amazon on their sites. Those ads often allow consumers to click through from the advertiser's Web site to Amazon.com. Under a New York law enacted last April, that amounts to solicitation of business in the state, Reuters reports.

Amazon had argued in its lawsuit that the New York law unfairly targets Amazon, is overly broad and vague, and violates the commerce clause of the constitution because it imposes tax-collection obligations on out-of-state entities.

Amazon has been complying with the New York law and collecting sales tax on shipments to New York, but had hoped to prevail in its lawsuit. The company has the right to appeal the New York Supreme Court's decision.

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