Last year the state of New York began demanding that online retailers charge sales tax on goods sold to New York residents.
Previously, sales tax was only chargeable by companies with a physical presence in the state. States usually do not charge sales tax unless a retailer maintains a physical presence there.
New York began asking retailers to collect taxes if they had affiliates in the state who helped to generate sales. If those affiliates generated more than $10,000 of sales in a year, sales tax was due on all shipments to New York residents, it said.
Amazon and other online retailers have extensive affiliate programmes. Web publishers can become Amazon associates, meaning that they share revenue from customers they refer to the site.
Amazon had denied that this brought it into the scope of the tax law, and said that those associates had no actual role in sales transactions, which took place outside the boundaries of the state. It sued New York to defend its right not to pay the sales tax.
New York State Supreme Court Justice Eileen Bransten ruled against Amazon. "There is no basis upon which Amazon can prevail," she said in her ruling, according to news agency Dow Jones.
Bransten said that the state should be entitled to the sales tax because it would not be levied on companies which sold into the state with no promotion within the state at all.
"The neutral statute 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," the judge said.
The state had only asked the retailer to collect the sales tax. Where it is not collected the tax is still payable, but it is up to the purchaser to declare and pay the tax.
