New York's Ambitious Sales Tax Law -- Broader than Amazon and the Internet?

Amazon says it is advertising when it compensates New York-based websites for posting links that refer customers to Amazon.com. New York says it's soliciting business. The distinction means all the difference in the world for sales taxes, for Amazon, and possibly even print media, television and radio.

Amazon.com sued New York State earlier this month, challenging a newly enacted law that has serious implications for online advertisements. In April, the New York legislature passed a law designed to increase sales tax revenue from Internet sales. The law is known as the "Amazon tax" because of the way it broadens the sales tax law to apply to Amazon's Associates Program, thereby achieving the necessary legal nexus for New York to force Amazon (and other Internet retailers) to collect and remit taxes on all sales to NY residents.

A little bit of history helps put this law into context. The Supreme Court has held that a state can only impose sales or use tax-collection obligations on an out-of-state retailer if the retailers has a "substantial nexus" with the state (the Quill decision). Nexus occurs from a sufficient physical presence, which can be an office or warehouse, but physical presence can also derive from soliciting a state's consumers via sales representatives located in the state. However, it can't be just any sales rep, according to another Supreme Court case -- in-state representatives must be "significantly associated with the taxpayer's ability to establish and maintain a market in the state" (Tyler Pipe).

Amazon doesn't have an office, warehouse or other physical presence in New York, but it has thousands of New York-based members of its Advertising Associates program. Per the Quill decision, advertising alone is insufficient to establish a substantial nexus. So New York has changed the definition of what it means to be a sales representative to capture these in-state associates that Amazon says merely hosts its ads. Under the new law, New York has changed the presumption of what it means to be "soliciting business" in the state. A seller

shall be presumed to be soliciting business through an independent contractor or other representative if the seller enters into an agreement with a resident of this state under which the resident refers potential customers, whether by a link on an Internet website or otherwise, to the seller, if the cumulative gross receipts from sales by the seller to customers in this state who are referred to the seller...is in excess of $10,000 [per year].

In its complaint, Amazon says that NY's law is unconstitutional because it violates:

1. the Commerce Clause. The law's presumption is unconstitutional on its face because it forces collection on out-of-state retailers that lack in-state entities that are significantly associated with Amazon's ability to operate in New York.

2. Due Process. It's vague and overbroad--what's an "indirect" referral? Would this capture NY print media, TV stations, and radio outlets? And what does it mean to refer potential customers "whether by a link on an Internet website or otherwise."? New York newspapers and TV networks, by referring potential customers, could be creating a physical presence for their advertisers just by running their ads. The law is also effectively an irrebuttable presumption, because Amazon is forced to disprove a negative -- that each and every one of its Associates aren't "soliciting business" directly or indirectly -- particularly because Amazon doesn't control the timing, format and placement of Amazon's ads on its Associates websites.

3. Equal Protection. Amazon feels unfairly singled-out by this tax.

Under New York's plan, it's important to note that there isn't any new money flowing into New York. Legislators like to speak as if this is newfound money, and that web retailers are shirking their duties by not collecting. But the ultimate burden isn't on the companies, it's on the taxpayers--the reality is that money will be collected from New York residents.

The gist is this: New York's law is a clever broadening of the definition of what it means to do business in a state. Madison Avenue, watch out! You may unwittingly be creating a physical presence for your out-of-state advertisers. And if other states adopt New York's approach, Michigan Avenue and other traditional media outlets could be in the same position.

-Braden Cox

Comments

[jackson]

Have a nice comment.
----------------
juliana

MLS

[Jeff Paul Scam]

I love the IT technology, my dad got me my first pc for my birthday and ever since I became a big IT freak. I started internet marketing for the last four months and still looking for material that can help my marketing.

[buy isk]

Best character intros: Sheppard in SGA’s “Rising” and Ronon in “Runner”.

[Jeff Paul Scam]

You can understant internet marketing in short forms like it refers to the placement of media along different stages of the customer engagement cycle through search engine marketing (SEM), search engine optimization (SEO),

[Jeff Paul Forum]

With tight economy government imposes over burden taxes as another mode of inflation , this results in a positive favor of internet marketing .

[jeff paul forum]

Amazon results in wide advertising , this is based on broad based selling , different products are categorized according to different features and creativity .

[Kirsten26]

I am willing to argue that a trustworthy essay writing service can be a good assistant on the way of analytical essay composing. Thence, students can utilize it every time they need buy essay online.

[generic viagra online]

In law schools, "tax law" is a sub-discipline and area of specialist study. Tax law specialists are often employed in consultative roles, and may also be involved in litigation. Many U.S. law schools require about 30 semester credit hours of required courses and approximately 60 hours or more of electives. Law students pick and choose available courses on which to focus before graduation with the J.D. degree in the United States. This freedom allows law students to take many tax courses such as federal taxation, estate and gift tax, and estates and successions before completing the Juris Doctor and taking the bar exam in a particular U.S. state.

[miramar puntarenas land for sale costa rica]

Hi In law schools, "tax law" is a sub-discipline and area of specialist study. Tax law specialists are often employed in consultative roles, and may also be involved in litigation. Many U.S. law schools require about 30 semester credit hours of required courses and approximately 60 hours or more of electives. Law students pick and choose available courses on which to focus before graduation with the J.D. degree in the United States. This freedom allows law students to take many tax courses such as federal taxation, estate and gift tax, and estates and successions before completing the Juris Doctor and taking the bar exam in a particular U.S. state.

[Virginia Marketing]

This is a beautiful site. I love its content and its design. I recommend this site among other people. Have a look on this also:
Conversion Pipeline is dedicated to leading your marketing strategy and providing crucial ongoing marketing and communications support.

[mortgage loans]

I took 1 st mortgage loans when I was very young and it aided my business very much. But, I need the consolidation loans as well.

[SEO Company]

Don't know what is wrong what is rite but i know that every one has there own point of view and same goes to this one..

[SEO Company]

Don't know what is wrong what is rite but i know that every one has there own point of view and same goes to this one..

[lots in Costa rica]

These articles are fantastic; the information you show us is interesting for everybody and is really good written. It’s just great!! Do you want to know something more? Read it...: Great investment opportunity in Costa Rica

[internet marketing]

Very intriguing article. I have truly learned something just reading this. I am going to keep an eye on this site!

[massage north palm beach]

Who knew this stuff? New York's Ambitious Sales Tax Law -- Broader than Amazon and the Internet? Wow!

[coach purses]

In live we have to full of confidence,because Self-confidence and self-reliance are the mainstays of a strong character.

[jordan 11]

Mishaps are like knives that either serve us or cut us as we grasp them by the handle or blade. Do you understand?

[Retro Jordans]

All of us have the ability to adapt our own story.

[brent@biginternetmarketingtools]

What are they thinking in N.Y.?
It's no wonder the companies and money people are leaving the state! They are being taxed to death.

[Jordan AJF 8]

These days, most talk about aid acknowledges the fact that good governance is a precondition of poverty eradication.

[Tess Gribben]

Sometimes I think the law is there to protect the criminal and not the decent person. As a wise man once said - "The Law's an ass!"

[Kevin - NWMLS Expert]

I like Huckabee's vision....transfer all taxes to sales tax and eliminate the black market.

[HowMuchHomeCanIAfford.org]

I really don't understand why amazon such a big player in the internet market is not having any office or warehouse or sales representatives in New york.

Thanks
Collin paul