New York State Supreme Court Justice Eileen Bransten tossed out Amazon.com's lawsuit challenging the state of New York's right to collect tax from out of state transactions through the retailer. Amazon reportedly failed to state a proper claim and "there is no basis upon which Amazon can prevail," according to Judge Bransten.
Amazon first filed a complaint in April, claiming the law was unconstitutional and too broad and vague.
The law comes into effect if a company doesn't have an office in New York, but has one or more workers who serve as online agents in New York. For example, New York residents didn't need to pay taxes on products sold because Amazon doesn't have official operations there -- Washington state shoppers, however, must pay taxes, as the state has a headquarters and warehouses there.
State officials widened how "presence" could be described, as Amazon said advertisers aren't classified as official agents for Amazon.com. The company hoped to have the law changed and have the state pay for all legal costs.
The popular online retailer also has an Associates Program that helps unaffiliated web site operators get paid when advertising Amazon on their own web sites. New York law indicates this eventually ends up being solicitation of business while operating in New York.
New York state officials said the new "Amazon tax" closes a "tax loophole" that should have never existed in the first place. Furthermore, the judge said the New York law was "carefully crafted" and didn't offer a blanket tax on all Internet sales, and didn't unfairly target Amazon.
Even though the lawsuit has been thrown out by lawmakers, Amazon can still appeal the decision.
Amazon spokespeople said the new law unfairly targets Amazon, and the state could generate as much as $50 million through 2011 from the tax. Taxing goods sold both in-state and shipped in could offer the state a new revenue stream to make up for the state's monetary struggles.
However, booksellers in the state are happy to see Amazon finally get taxed.
"The state of New York was subsidizing sales on Amazon to the degree of 8 percent," American Booksellers Association Oren Teicher chief operating officer told the Associated Press. "That was unfair. The government ought not ever be in business of picking favorites among competing businesses."
New York recently unveiled a new entertainment tax that would tax all songs through Apple iTunes, as the state's government faces a massive $15.4 billion deficit.