Amazon has filed suit challenging New State's new law that will force online retailers to charge tax on shipment to its state's residents. The issue isn’t whether people should pay taxes when they buy goods from out-of-state sellers like Amazon, which is based in Seattle. For decades, New York and other states have required their residents to pay use tax — equivalent to sales tax — on out-of-state purchases for which sales tax wasn’t collected. This was in essence voluntary and required the buyer to declare these purchases when filing taxes.
The question is whether the vendors must collect those taxes on behalf of the state. Generally, only those companies that have a physical presence, like an office or store, in the state of the purchase are required to collect the taxes.
The new state law says that if even one of those affiliates is in New York, Amazon must collect sales tax on everything sold in the state, even if it is not sold through the affiliate. This is an extension of an existing rule that companies that employ independent agents or representatives to solicit business must collect sales taxes for the state.
Amazon’s complaint argues that the statue is “overly broad and vague.” It is impossible, Amazon wrote, for it to determine which of its affiliates are actually in New York State.
Excerpts taken from this New York Times blog post