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1 Joseph Henchman & Justin Burrows, Amazon Tax Unconstitutional and Unwise 1 (2009)

handle is hein.taxfoundation/ffbihxz0001 and id is 1 raw text is: OUNDATION September, 2009 No. 187 FISCAL FACT Amazon Tax Unconstitutional and Unwise By Joseph Henchman and Justin Burrows Amazon.com, LLC v. New York State Department of Taxation and Finance On September 9, 2009, the Tax Foundation filed an amicus curiae brief (friend of the court) in the New York Supreme Court, Appellate Division, First Department, in the case of Amazon. com, LLC v. New York State Department of Taxation and Finance, No. 601247-2008. The case is on appeal from the trial-level Supreme Court of New York. (The highest court in New York is called the Court of Appeal.) States Can Only Tax Businesses That Have Substantial Nexus With the State When a consumer buys something online, in many cases that consumer is not charged sales tax by the online retailer. The U.S. Supreme Court has ruled that, to prevent disruptions to interstate commerce, a state may force only those businesses with a substantial connection with the state (nexus) to collect its sales tax.' Otherwise, businesses would face an enormous burden of complying with over 8,000 separate sales tax jurisdictions, with ever-changing bases and rates.2 Thus, only businesses with employees or property in a state usually collect a state's sales tax, even if the employees or offices are not directly involved in soliciting sales in the state.3 Substantial nexus does not exist if a company has no employees, offices, or outlets in the state, nor independent persons whose activities are crucial for establishing and maintaining the in-state market for the company's sales.4 New York and Two Other States Enact Amazon Tax Law Frustrated by its residents who purchase items online but do not pay the sales or use tax they owe, New York targeted online retailers with only the slightest connection to New York by enacting the so-called Amazon tax in April 2008. It is designed to force online retailers like Amazon.corn to collect New York sales tax on purchases made by New Yorkers, even though

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