On March 27, the New York Supreme Court rejected a challenge by Amazon and Overstock to a state law that requires online retailers to charge local citizens sales tax.

The online retailers had challenged the law, which passed in 2008, saying it violated the Constitution’s Commerce Clause by subjecting online retailers to New York State taxes. 

But the decision argued that the law was constitutional, noting it stipulates that the state will only collect sales tax from companies with a “nexus” in the state, which includes paying affiliates to gain referrals.

“If a vendor is paying New York residents to actively solicit business in this State, there is no reason why that vendor should not shoulder the appropriate tax burden,” said the opinion authored by chief judge Jonathan Littman.

New York State is currently one of two states where e-tailer Blue Nile charges sales tax.

Overstock has said it is considering appealing to the Supreme Court, and added that it is willing to accept an “appropriate” federal solution to the issue.

“This is a fairness question which the Congress alone must resolve,” said acting CEO Jonathan Johnson in a statement. “There are more than 9,600 taxing districts in the country, and if Congress moves that enormous tax collection burden to remote retailers, then in fairness, Congress should require states to pay reasonable compensation to those retailers for the associated costs.” 

Not every jurist has agreed with the New York State Supreme Court; in 2012, an Illinois court struck down its state’s online sales tax law.

Rob Bates

JCK News Director