The debate, boiled down simply, is should Amazon be required to collect sales taxes in states and what defines a physical presence?
While this has been an ongoing dispute, it has recently escalated as states look to recover deficits coming out of the recession. One way to do this would be through sales taxes.
In response to these laws, Amazon has threatened, and in some cases, discontinued its affiliate relationships in several states and is reportedly planning on taking legal action against states that have recently passed such legislation.In the past, Amazon has been protected by a 1992 Supreme Court ruling (Quill Corporation v. North Dakota) that prohibits a state from forcing a business to collect sales tax unless it has physical stores in the state. While taxpayers in most states are required to pay the tax directly to the government, few actually do. But now several states are seeking to get around these restrictions by passing laws that expand the definition of physical presence. The target has been on those e-commerce sites that work with affiliates. Affiliates are partner sites that earn commissions by advertising or linking to an online retailer's merchandise. Currently, Amazon collects sales tax in five states -- Kansas, Kentucky, New York, North Dakota and Washington -- the only markets where it has stores or offices. But if other local governments have their way, this could soon change. Here's a state-by- state look at how Amazon is handling the sales tax debacle...
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