New York State Imposes “Amazon” Tax

April 17th, 2008

GovernmentPoliticians have been fuming for years over the significant amount of sales tax lost to internet sales. Case law states that an internet business must have a physical presence in the state in order to be forced to collect sales tax for that state. In the case where the sales tax is not collected by the business, a use tax usually applies. But individual consumers rarely pay use taxes for internet purchases.

The state of New York believes it has found a loophole. Some online retailers, such as Amazon, have affiliate programs. If Chad’s News was an Amazon affiliate, for example, I would have special links on my site to Amazon products, and I’d receive a percentage of any sales made via someone clicking on those links. New York legislators contends that my (theoretical) status as an affiliate constitutes a physical presence, and (if I lived in New York) allows them to require Amazon to collect sales tax. It’s convoluted. Expect court challenges.

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