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New York State to Supreme Court: Let Amazon Tax Stand

6 Nov, 2013 By: Doug McPherson

ALBANY, N.Y. – New York authorities say in new court papers that the U.S. Supreme Court should let the decision that approves New York's Amazon tax stand.

That tax, imposed in 2008, requires online retailers to collect sales tax if they use in-state affiliates, including online publishers that get commissions if people make purchases after clicking on ads. Earlier this year, New York's highest court upheld the law, which Amazon and Overstock have challenged.

The retailers recently asked the U.S. Supreme Court to hear an appeal about the law. But New York authorities oppose that request saying the tax law facilitates the collection of millions of tax dollars and that the law “seeks to restore a level playing field between in-state brick-and-mortar stores and their out-of-state Internet-only counterparts.”

Amazon and Overstock unsuccessfully sued to block the law. They argued that they couldn’t be required to collect sales tax without a "substantial nexus" to the state – like brick-and-mortar stores. The companies relied on a 1992 U.S. Supreme Court ruling that catalog companies need not collect sales tax unless they had outlets in the state.

New York's Court of Appeals ruled 4-to-1 in March that companies with in-state affiliate marketers have sufficient ties to New York to justify collecting taxes. But Amazon and Overstock argue that the tax unconstitutionally restricts interstate commerce.

After New York's law went into effect, around 200 online retailers, including Overstock and Blue Nile, stopped working with affiliates in the state. Amazon didn't drop New York affiliates, but stopped working with affiliate marketers in several other states that passed similar laws.

MediaPost News reports that, in all, 13 states recently passed laws requiring online commerce companies to collect sales tax in some circumstances. Consumers already are supposed to pay state sales tax on all purchases, including those made online, but many under-report their online E-commerce activity.

In Illinois, the Performance Marketing Association (PMA) successfully argued that the Illinois online tax law illegally discriminated against online companies. That law required companies to collect sales tax if they worked with online performance marketers – meaning Web publishers that display ads linking to retailers' sites – but not offline performance marketers.

About the Author: Doug McPherson

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