Amazon sues New York over new tax collection law.(News & Numbers)

New York state's recently adopted budget for fiscal year 2009 calls on remote sales retailers to collect sales and use taxes on all goods shipped to New York residents, and remit the sales tax to the state. Specifically, the law states that any company with at least $10,000 in annual sales, either by itself or through in-state affiliates, must collect taxes on all sales. The budget provision is expected to yield the state approximately $50 million over the fiscal year.

Amazon.com has filed a complaint against the state, questioning the legality of the law. While Amazon.com does not question whether taxes should be paid on goods from remote sellers, it argues that retailers should not be the parties responsible for the tax collection. In most states, businesses are required to collect taxes only on sales in states where they have a physical presence. New York's new law defines physical presence as including any businesses that have an affiliation--including a Web link--to a New York business. So if the Amazon.com Web site contains a link to any business located in the state, for instance, the entire Web site is considered to have physical presence there and taxes must be collected, even if the purchase itself was not from a link to a New York business.

The state is expected to file a formal reply to the suit in late spring.

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