New York Asks Supreme Court To Turn Away Challenge To Amazon Tax

The Supreme Court should let stand a decision approving New York's “Amazon tax,” state authorities argue in new court papers.

The state's Amazon 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 was challenged by Amazon and Overstock.

The retailers recently asked the Supreme Court to hear an appeal about the law. New York authorities are opposing that request. They argue in papers filed last week that the 5-year-old tax law serves an important function in facilitating the collection of millions of tax dollars.

The state adds 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 can'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.

In March, New York's Court of Appeals ruled 4-to-1 that companies with in-state affiliate marketers have sufficient ties to New York to justify the tax-collection requirement.

Amazon and Overstock have asked the Supreme Court to take up the case. The companies 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.

Overall, 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 ecommerce activity.

While New York's highest court upheld its law, a similar law in Illinois was recently struck down by that state's top court. In that case, the Performance Marketing Association successfully argued that the Illinois 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.

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