Amazon: Rejected by U.S. High Court on New York Sales Tax

According to Bloomberg,

The U.S. Supreme Court stayed out of the multibillion-dollar fight over Internet sales taxes, leaving intact a New York law that forces Amazon.com Inc. (AMZN) to collect money from customers in that state.

Acting on one of the biggest online-shopping days of the year, the justices made no comment in rejecting appeals by Amazon and Overstock.com Inc. (OSTK), another Internet retailer. The companies said the law, upheld by New York’s top court, violates the Constitution by demanding tax collection from businesses that don’t have facilities in the state.

States lose an estimated $23 billion a year in uncollected sales taxes from web retailers. Although Amazon has agreed to collect taxes in some states as it sets up distribution centers, 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.

The New York law “subjects Internet retailers to significant burdens on pain of serious civil and criminal penalties,” Seattle-based Amazon argued in its appeal. The world’s biggest online retailer now collects taxes in 16 states.

The rebuff leaves it to Congress to craft a nationwide approach to the sales-tax issue. Amazon supports federal legislation that would explicitly let states require tax collections by all online retailers above a certain size.

‘Physical Presence’

Amazon.com Homepage

Amazon.com Homepage

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. New York alone lost $1.8 billion in 2012 on Internet and catalog sales, according to the National Conference of State Legislatures. Although consumers are supposed to pay the taxes themselves, few do unless the seller collects the money.

New York has a 4 percent statewide sales tax, and local jurisdictions impose additional levies. In New York City, the total tax rate is 8.875 percent.

New York said in court papers that its 2008 tax law “seeks to restore a level playing field between in-state brick-and-mortar stores and their out-of-state Internet-only counterparts.”

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