Amazon.com Inc. is suing the state of New York to block a new law that requires out-of-state internet retailers to collect sales taxes if they have a physical presence in the state.
Attorneys for the Seattle online giant (NASDAQ: AMZN) filed the lawsuit in New York City on April 25 challenging the constitutionality of the law, which was enacted as part of the 2008-2009 state budget. The state estimates the tax will generate $50 million this fiscal year and $73 million in 2009-2010.
Any online company with a physical presence in the state that had at least $10,000 in sales during the past year must comply with the law and begin collecting sales taxes June 1.
The law has been cheered by the owners of independent bookstores, who say it levels the playing field between them and Amazon.
Amazon sells merchandise exclusively online but the state contends it meets the criteria for sales tax collection because of its "associates" program. Associates receive up to 10 percent in referral fees from Amazon by creating links on their blogs or websites that enable people to click through and purchase products.
Since there are Amazon associates in New York, the state contends they are considered sales representatives under the new law.
Amazon argues the law's definition of solicitation is "overly broad and vague" and that the law violates the state and U.S. constitutions because it "intentionally targets Amazon."
The New York state Department of Taxation and Finance isn't commenting on the lawsuit, spokesman Tom Bergin said Monday.
Of the 10 largest internet retailers in the state, eight already collect sales taxes because they also have a brick-and-mortar presence. Those retailers include Dell, OfficeMax, Target and Sears.
Amazon.com and
Newegg.com, an online seller of computer supplies, are the only two of the top 10 internet retailers that don't collect sales tax.
Online retailers that have no physical presence in the state aren't required to collect sales taxes under the new law.