Amazon.Com V New York

Facts

Amazon.com is a worldwide online retailer with their corporate headquarters in Washington. They do not have any offices in New York, and none of its employees work or live in New York.

Amazon started an “Associates Program” which permitted “associates” to have links to Amazon.com on their own websites. Associates were classified as 1099 independent contractors via an operating agreement. The agreement outlined how

Amazon would pay these associates a percentage of a sale (commission). Amazon implemented program that paid associates a flat fee for each direct referral that enrolled in the Amazon Prime program. The agreement goes on to outline a few other terms of the operating agreement between the associates and Amazon.

From these hundreds of thousand associates, thousands of them “have provided amazon with addresses in New York. Sales to New York customers originating from New York based associate referrals constitute less than 1.5% of Amazon’s New York sales. These associate programs generate more than $10,000 per year in sales to New York Customers.

Law

In 2008, New York amended their tax law that required “every vendor of personal property” collect sales tax. It stated that “if the cumulative gross receipts from sales by the seller to the customers in the state who are referred to by the seller by all residents with this type of an agreement with the seller is in excess of ten thousand dollars during the preceding four quarterly periods… this presumption may be rebutted proof...... that would satisfy the nexus requirement of the United States Constitution…”

Amazon began collecting taxes from its New York customers but did so under "under protest." They filed a complaint in the New York State Supreme Court arguing that the new law violates the commerce clause of the U.S. Constitution because it imposes tax-collection obligations on out-of-state entities that have no substantial nexus with New York. Amazon also asserted that a...