Online retailer Overstock.com has filed a suit challenging New York State's "Amazon Tax," according to a company release.
New York State recently ruled that online retailers doing business with in-state inhabitants must collect sales tax on those purchases. The law went into effect on Saturday and is expected to generate $50 million in revenue for New York this year.
The ruling may retard online retail growth by sparking copycat laws in other states. Shortly after the Amazon Tax bill passed, California began mulling a state tax on digital downloads.
Last month Overstock cut ties with all New York-based affiliates, following news that Amazon had filed suit against the state.
"We love New York," admitted CEO Patrick Byrne of Overstock. "But we had to choose our New York customers over the New York tax collector armed with an unconstitutional statute."
Mark Griffin, Overstock's attorney, expressed confidence in the company's legal position against New York.
"The applicable United States Supreme Court cases on the question of whether the state can collect taxes under these circumstances make it clear that New York cannot constitutionally require Overstock.com to collect these taxes," he stated.
New York State's sales tax rate is 8.75 percent.