New York (NY) – A New York Supreme Court judge ruled yesterday that Amazon and Overstock must pay sales tax on sales conducted with residents living within the state of New York. The ruling comes following an 8-month case challenging a New York tax law called The Commission-Agent Provision.
A 1992 US Supreme Court decision stated that retailers did not need to collect taxes unless they have a physical presence in the state where customers reside. Clever New York lawmakers addressed that provision in their new law by relating it to marketers. Amazon.com maintains several New York-based non-Amazon affiliates who conduct business on the Amazon.com website.
Amazon claimed that the company itself did not have a sufficient presence in New York state to be compelled to collect and pay sales taxes. Judge Eileen Bransten’s ruling disagreed, citing business transactions between Amazon.com and its New York affiliates.
In her decision, Judge Bransten wrote:
“In the end, the Commission-Agreement Provision does not broadly tax any and all Internet sales to New York consumers. It requires a substantial [presence] between an out-of-state seller and New York through a contract to pay commissions for referrals with a New York resident along with realization of more than $10,000 of revenue from New York sales earned through the arrangement. The neutral statute simply obligates out-of-state sellers to shoulder their fair share of the tax collection burden when using New Yorkers to earn profit from other New Yorkers.”
It is likely both Amazon and Overstock will appeal this case. Since it involves constitutional issues relating to the the 14th amendment and due process, it could theoretically go all the way to the U.S. Supreme Court.
See TG Daily for other Internet sales tax news.