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Amazon loses a New York court case that has been ongoing for around nine months

New York State Supreme Court Justice Eileen Bransten tossed out'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  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. 

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RE: No surprise
By MightyAA on 1/15/2009 10:29:48 AM , Rating: 2
And the laws do not predate mail order shopping. Mail order has been around a very long time... just look at the Sears catalog; this was the only real way to get a lot of products back in the wild west days. Online has made it easier.

It's because the way NY is doing it, any ordered product is being double taxed which increases the price to the consumer. You forget that places like Amazon also pay sales tax locally at their headquarters. So it's like you driving across the state line and buying a pop at gas station. That gas station is supposed to track that you were from NY and pay NY taxes (as well as local taxes). That's just wrong... You should only pay taxes where the business is located, or they should change ALL tax laws to charge tax based on the purchaser's place of residence (a major pain, but that's how car sales do it)... you can't have it both ways. NY should focus on getting these large online sellers to relocate to their state instead of forcing their residents to fund their mismanagement cost.

RE: No surprise
By HrilL on 1/15/2009 2:39:46 PM , Rating: 2
They don't pay sales tax on items sold out of state and neither does any other online company. They only pay taxes on the items sold within their states if that state does charge sales tax.

RE: No surprise
By knipfty on 1/15/2009 4:33:45 PM , Rating: 2
Cars are taxed when registered. NYS will then credit back any sales tax paid out of state when applying the sales tax. The only people that NYS are hurting is its own citizens.

I expect Amzon to appeal this ruling and fight on. This will hurt their business model.

"This is about the Internet.  Everything on the Internet is encrypted. This is not a BlackBerry-only issue. If they can't deal with the Internet, they should shut it off." -- RIM co-CEO Michael Lazaridis

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