In a decision by Justice Eileen Bransten made public Tuesday, Amazon was told it's required to collect sales taxes on shipments into New York. Amazon has been collecting the taxes anyway even as it challenged the tax issue in court.
It wasn't immediately clear whether the decision would broadly apply to other Internet retailers. Another online retailer, Overstock.com, said it's challenging the leveling of similar sales taxes, and it could take some time before a ruling on the Overstock litigation can be made.
The Amazon case differs from typical online sales tax regulation, which requires companies to levy sales taxes in only the states in which they have nexus -- a physical operation. Amazon has no operations in New York, but the judge in effect ruled that because Amazon has affiliates and partners in the state, the company should pay sales taxes on items sold over the Internet.
"Amazon should not be permitted to escape tax collecting indirectly," Bransten wrote in her decision, "through use of an incentivized New York sales force to generate revenue, when it would not be able to achieve tax avoidance directly through use of New York employees engaged in the very same activities."
New York state had argued that Amazon indeed had affiliates -- Internet site operators who earned commissions for sending customers to the online auction company.