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Amazon Anti-Tax Suit Dismissed

E-tailer Amazon.com challenged N.Y. law requiring tax collection by out-of-state firms.

A judge has dismissed an Amazon.com Inc. lawsuit challenging a New York law requiring out-of-state companies, even those engaging exclusively in e-commerce, to collect sales tax.

Amazon filed the suit in April, two days after Gov. David Paterson signed a measure requiring companies without offices in New York, but with at least one paid operator in the state, to collect sales tax. The statute applies to any company that generates more than $10,000 in New York sales in a fiscal year.

State Supreme Court Justice Eileen Bransten in Manhattan dismissed Amazon’s complaint on Tuesday for failure to show cause.

“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,” she wrote in the decision.

Seattle-based Amazon has to abide by the statute because its Associates Program pays small commissions to thousands of independent Web sites, some based in New York, that provide links to its online stores.

The Internet retailer argued that the law violates the commerce clause of the U.S. Constitution because it subjects out-of-state retailers to New York state tax obligations. It said that its associates did not specifically solicit New York business and alleged the statute unfairly targeted its operations, with some state officials referring to it as the “Amazon tax.”

A company representative said Wednesday that Amazon would not comment on the ruling.

The decision came on the same day that Moody’s Investors Service said it had put Amazon’s debt ratings on review for a possible upgrade based on the strength of its holiday performance, which Amazon said was the company’s best ever.

Shares of Amazon Wednesday closed at $48.49, down $2.96, or 5.8 percent. �