The opinion of the court was delivered by: Eileen Bransten, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the printed Official Reports.
Pursuant to CPLR 3211(a)(2) and (7), defendants New York State Department of Taxation and Finance, Robert Megna, in his Official Capacity as Commissioner of the New York State Department of Taxation and Finance, The State of New York, and David A. Paterson, in his Official Capacity as the Governor of the State of New York (collectively "the State") move to dismiss the complaint. Plaintiffs Amazon.com LLC and Amazon Services, LLC (collectively "Amazon") oppose dismissal and cross-move for summary judgment.
Since 1995, Amazon has been operating a retail internet business (Mastro Aff., Ex. 1, at ¶ 4). Its goods are sold online and shipped to buyers worldwide, including to New York (id. at ¶ 20). Amazon does not own property in New York or maintain any New York offices.*fn1 None of its employees work or reside in New York (Mastro Aff., Ex. 1, at ¶ 20).
Amazon's Associates Program
Amazon created an "Associates Program," which allows participants ("Associates") to maintain links to Amazon.com on their own websites and compensates them by paying "a percentage of the proceeds of the sale" (Mastro Aff., Ex. 1, at ¶ 23). Amazon also offers incentives to Associates that "directly refer" customers to its Amazon Prime program through website links, paying them a "$12 bounty" for each new enrollee (id., Ex. 24, at ¶ 5).
Prospective Associates must apply to join the program (Mastro Aff., Ex. 1, at ¶ 21; Ex. 24). Assuming that Amazon accepts the application, the parties enter into an Operating Agreement, which makes clear that the "Relationship of [the] Parties" is that of "independent contractors" (id., Ex. 24, at No. 14). Associates are granted "a revocable, non-exclusive, worldwide, royalty-free license . . . solely for purposes of facilitating referrals from [their sites] to the Amazon Site" (id., Ex. 24, at # 2).
Amazon authorizes Associates to place different types of links from their websites to its own. For example, Associates can set up a "product link," generally allowing them to "select one or more Products [on Amazon's site] to list on [their own] site," a "search box link," which permits visitors to the Associate's site to view Amazon merchandise related to their queries, or a "cart link," which "when clicked will allow visitors [of the Associate's site] to add products to their shopping cart and/or purchase products via [Amazon's] 1-Click feature" (Mastro Aff., Ex. 24, at # 2).
As a condition of participation, Associates acknowledge that Amazon "may receive information from or about visitors to [their sites]" and that Amazon "may from time to time send [them] email updates about the Program" (Mastro Aff., Ex. 24, at # 2).
The Operating Agreement further sets forth that Associates will be paid through a "referral fee" and can elect between the "Classic Fee Structure" (generally 4% of qualifying revenues from sales of products sold through special links) or the "Performance Fee Structure" (a percentage of qualifying revenues set forth in a table that varies with the number of total items shipped) (Mastro Aff., Ex. 24, at # 5).
Amazon has hundreds of thousands of Associates. Thousands "of them have provided Amazon with addresses in New York" (Mastro Aff., Ex. 1, at ¶ 25). Sales to New York customers originating from New York-based Associate referrals constitute less than 1.5% of Amazon's New York sales (Comfort Aff., at ¶ 6). Without disclosing the dollar amount of those sales, Amazon simply acknowledges that its "Associates Program generates more than $10,000 per year in sales to customers located in New York" (id. at ¶ 13).
2008 Amendment of New York's Tax Law
In New York, "every vendor of tangible personal property" is required to collect sales tax (see NY Tax Law §§ 1131, 1105). Included in the definition of "vendor" is:
"A person who solicits business either:
(I) by employees, independent contractors, agents or other representatives . . . and by reason thereof makes sales to persons within the state of tangible personal property or services, the use of which is taxed by this article" (NY Tax Law § 1101[b][i][C]).
On April 23, 2008, Governor Paterson signed into law NY Tax Law § 1101(b)(8)(vi) ("Commission-Agreement Provision"), which provides that for purposes of ...