High court lets N.Y. ruling on online tax stand
Amazon.com and Overstock.com had appealed. More states may now try to tax Internet sales.
WASHINGTON - On perhaps the busiest online shopping day of the year, the Supreme Court refused Monday to wade into a dispute over New York state's taxes on purchases from websites like Amazon.com. The move likely will prompt more states to attempt to collect taxes on Internet sales - and ignite a furious battle in Congress involving Internet sellers, brick-and-mortar stores, and states hungry for extra tax revenue.
The high court without comment turned away appeals from Amazon.com L.L.C. and Overstock.com Inc. in their fights against a New York court decision forcing them to remit sales tax the same way in-state businesses do. This could affect online shopping in that state, since for many shoppers one of the attractions of Internet purchasing is the lack of a state sales tax, which makes some items a little cheaper than they would be inside a store.
The legal dispute revolved around a 1992 Supreme Court case involving a mail-order company. The court said retailers can be forced to collect a tax only in states where they have a "physical presence."
The rise of the Internet has increased the stakes since then, putting tens of billions of dollars at issue. The National Conference of State Legislatures estimated that states lost an estimated $23.3 billion in 2012 in uncollected sales tax from web retailers. New York alone lost $1.8 billion in 2012 on Internet and catalog sales. Although consumers are supposed to pay the taxes themselves, few do unless the seller collects the money.
Amazon has agreed to collect taxes in 16 states, sometimes where it has, or is building, distribution centers - including Pennsylvania and New Jersey. But it has resisted efforts by others to impose sales taxes unilaterally. New York's measure is among a handful that have been dubbed "Amazon laws" because they affect only the largest online sellers.
New York and other states say that a retailer has a physical presence when it uses affiliates - people and businesses that refer customers to the retailer's website and collect a commission on sales. These affiliates range from one-person blogs promoting the latest gadgets to companies that run coupon and deal sites.
Amazon and Overstock both use affiliate programs. Amazon has been collecting sales tax in New York as it fights the state over a 2008 law that was the first to consider local affiliates enough of an in-state presence to require sales tax collection. Overstock ended its affiliate program in 2008 after the law passed, but was considering resuming the program.
Amazon supports proposed federal legislation that would let states collect taxes from online retailers with at least $1 million in annual out-of-state sales.
The Senate passed the Amazon-backed legislation May 6 on a bipartisan 69-27 vote, and opponents vowed to fight in the House. Other supporters include Wal-Mart Stores Inc. and Best Buy Co.
The measure "would protect states' rights to make their own revenue policy choices while allowing them to collect more than a fraction of the revenue that's already owed," Ty Rogers, an Amazon spokesman, said in an e-mail, according to Bloomberg News.
The House Judiciary Committee, led by Republican Rep. Bob Goodlatte of Virginia, has not held a hearing or released a schedule for considering the measure.
Rachelle Bernstein, vice president and tax counsel at the National Retail Federation, said she was hopeful that Congress will pass a law this year or next.
"There was always a need for federal legislation to provide some uniformity and simplicity to this area of the law and that need is still there," Bernstein said, according to Bloomberg. Her group represents Macy's Inc. and the Container Store Group Inc.
EBay Inc., operator of the largest online marketplace, opposes the legislation. The company did not take a position on the Supreme Court appeals.