Amazon's Sales Tax Lawsuit in NY State Court Gets Dismissed

A New York court has dismissed Amazon's lawsuit over a law that required the online retailer to collect taxes from New Yorkers even though it didn't have a physical presence in the state.

The law, enacted back in April by Governor Patterson, forced Amazon to collect and remit sales and use taxes if they had an affiliate seller inside the New York State. This helped the State government bypass a 1992 Supreme Court decision that allowed interstate commerce to be untaxed.

Amazon filed the lawsuit in May, claiming that the law was vague and unconstitutional. While Amazon wasn't against collecting state taxes, it was against dragging all its affiliate sellers into what it felt was a bureaucratic mess. And it kind of is!

As Eric Schonfeld of TechCrunch wrote back then:

The law, as written, is just a bad law. And it would set a dangerous precedent. Not because New York State shouldn't try to collect the $50 million in estimated uncollected sales taxes owed to it. But because the law is tortuous in the way it attempts to do that.

A marketing affiliate is not part of Amazon. If I put some Amazon book recommendations on the side of TechCrunch , set up an affiliate account, and readers click through and buy those books, that does not make TechCrunch part of Amazon. It is a marketing arrangement. Just like someone who sets up an AdSense account does not work for Google.

The only retailers exempt from reporting sales tax are those who earn less than $10,000 in sales. To save trouble, Amazon could just drop them as soon as they hit the $9,999 mark. That in turn would dampen e-commerce, leading to less tax revenue for the state and then everybody loses! Thanks Albany! [Channel Register via Gothamist]