Amazon.com’s lawsuit challenging New York’s new statutory provision concerning Internet retailers has been dismissed. Under the new Commission-Agreement Provision that Governor Paterson signed into law, retailers that solicit business by entering into an agreement with a resident of the state, for a commission or other consideration, that directly or indirectly refer potential customers, whether by link on an internet website, and the receipts from these referrals is in excess of $10,000, must collect and remit New York sales tax. Amazon filed suit against the State alleging that the provision violated the Commerce Clause because it imposes tax collection obligations on out-of-state entities that have no substantial nexus with New York. Amazon also contended that it violated the Due Process Clause because it effectively created an irrebuttable presumption of “solicitation” and is overly broad and vague. Amazon further contended that it violated the Equal Protection Clause because it intentionally targeted Amazon. While the New York Supreme Court held that even accepting all of the facts alleged by Amazon to be true, the Court held that there was no basis upon which Amazon could prevail. Therefore, the Court dismissed Amazon’s arguments and the lawsuit for failure to state a cause of action. The State of New York stated that the “neutral” Commission Agreement simply obligates out-of-state sellers to shoulder their fair-share of the tax-collection burden when using New Yorkers to earn profit from other New Yorkers.
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(Amazon.com LLC v. New York Department of Taxation and Finance, New York Supreme Court, New York County, Index No. 601247/08, January 12, 2009)