In 2008, New York enacted its “Amazon Law” to require certain out of state internet vendors to collect New York sales tax on sales made over the internet into New York. The law requires out-of-state vendors that previously were not considered to have an adequate nexus with the state to collect sales tax on behalf of the state. The law dictates that adequate nexus may exist and collection is required when an on-line retailer agrees with independent in-state websites, known as affiliates, to place links on the affiliates’ websites. The links direct customers to the retailer’s website and the affiliate receives a commission when a buyer follows a link and makes a purchase. Such laws seek to overcome the federal Constitutional requirement that internet retailers such as Amazon.com, have a physical presence in a state in order for the state to be able to require that the internet vendor collect the state’s sales tax on sales made into the state.

Other states that have been actively following the lead of New York in considering the adoption of “Amazon Laws” include California, Hawaii, North Carolina and Rhode Island. While the New York law has been upheld by a New York state court, challenges to such laws are expected to be ongoing.