Amazon challenges New York online sales tax in court

New York’s lawmakers recently passed a law requiring Amazon to collect sales tax on orders delivered to the state. New Yorkers are obligated by law to pay the state sales tax on their online purchases by voluntarily remitting the funds to the state. It’s not surprising volutary compliance is low, especially in one of the most heavily taxed places on earth.

The dispute, which is before a state court in Manhattan, is heading toward a constitutional showdown that will center on whether New York State is hindering interstate commerce by imposing on out-of-state companies, such as Amazon.com, the burden of serving as a tax collector for New York.

The so-called Amazon tax has been a touchy political issue as Albany has looked for novel ways to fund the state government’s soaring spending amid a predicted drop-off in state tax revenue as the economy slows. The state’s tax department first set its sights on Amazon.com last year when it quietly changed its policy to require some online retailers to begin collecting state and city sales taxes — a combined 8.375% on purchases in New York City — on all orders from residents of New York State.

Hours after The New York Sun reported the initiative, Governor Spitzer pulled the plug on it — temporarily. Last month, the Legislature and Governor Paterson approved a law that requires Amazon.com to start collecting and remitting sales taxes to New York. No other state is requiring the same of online retailers that don’t have a physical presence in the state. (NY Sun)