Overstock.com sues New York over Internet tax law

NEW YORK (Reuters) - Overstock.com said on Friday it filed a lawsuit to challenge a New York law requiring Internet retailers to collect and pay New York state taxes on sales to New York consumers even if the retailer does not have a physical presence in New York.

The online retailer said it named the New York State Department of Taxation and Finance, tax commissioner Robert Menga and Gov. David Paterson as defendants in the complaint filed with the New York Supreme Court.

Overstock.com, which follows Amazon.com Inc in challenging the law, said it is asking the court for an injunction and to declare the law unconstitutional.

The company, which is based in Utah, said that on May 15 it told more than 3,400 New York-based affiliate advertisers that as of June 1 they could not provide advertising for Overstock.com because of the new law, which comes into effect at that time.

The law would require it to collect up to 8.75 percent sales tax on all its sales to New York customers, it said.

(Reporting by Sinead Carew; editing by Carol Bishopric)