Feb 6 Major online retailers Amazon.com Inc
and Overstock.com on Wednesday told a New York
state court that they should be allowed to not charge state
The case, in the State of New York Court of Appeals,
represents one of the first legal tests of recent "Amazon taxes"
meant to make online retailers start charging state sales taxes.
Amazon and Overstock attorneys argued before the court that
a 2008 New York law requiring companies with affiliates in the
state to collect sales tax was unconstitutional.
For New York, millions of dollars in tax collections ride on
the court's decision, expected by June.
Retailers with a physical presence in any state must remit
sales tax on purchases made either in a store or online.
But a 1992 Supreme Court decision, Quill Corp v. North
Dakota, said retailers lacking a "nexus" of operation in a state
need not collect sales tax.
The New York law applies the nexus concept in a novel way.
It says that websites with purchase buttons for Amazon or other
national retailers get fees based on sales delivered that make
the sites local solicitors for the larger retailers.
Lower courts have sided with the state and found in favor of
the law. But on Wednesday, some members of the five-justice
panel took clear interest in the companies' argument that web
referrals do not constitute a local sales force, but rather are
something more akin to buying newspaper advertising.
The idea that putting an ad in the newspaper makes the paper
an advertiser's sales force is "absurd" argued Randy Mastro, a
partner with law firm Gibson Dunn, representing Amazon.
Steven Wu, attorney for the state, said web purchase buttons
differ from advertising. "Advertising gets people to the door of
a business, soliciting gets them to the register," said Wu.
Between the law's passage in 2008 and February 2012,
online-only retailers collected and remitted to New York $360
million in sales tax on more than $4 billion in transactions,
according to the state's Department of Taxation.
Legislation that could resolve these issues has been
introduced in the U.S. Congress, but has not come to a vote. The
issue may end up before the U.S. Supreme Court. Mastro said the
case will be appealed no matter the result.
The cases are Overstock.com v. New York State Department of
Taxation and Finance, New York State Court of Appeals No.
APL-2012-00017, and Amazon.com v. New York State Department of
Taxation and Finance, New York State Court of Appeals