New York is within its legal rights to collect sales tax from large, online retailers, the state’s top court found Thursday.
The Court of Appeals ruled 3-1 against Amazon and Overstock.com, which had challenged a provision of state law that requires online sellers to collect sales tax on New York-based purchases, even if the company isn’t based in the state. The provision applies to businesses pull in at least $10,000 a year by soliciting to state residents, including through programs that allow in-state websites to earn commissions by linking to the retailers.
“The bottom line is that 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,” reads the court’s decision, written by Chief Judge Jonathan Lippman.
Amazon and Overstock had argued that the Internet tax provision violates both the Commerce Clause and the Due Process Clause of the Constitution, but the court rejected both claims. The section of state law regarding Internet sales presumes that an online seller is soliciting within New York if it sells to a state resident, which the companies argued was unconstitutional.
Judge Robert Smith dissented, arguing that allowing the state to assume a business is soliciting within New York violates the Commerce Clause.
UPDATED: State Taxation and Finance Commissioner Thomas Mattox takes a victory lap:
“Today’s Court of Appeals Decision affirms New York State’s approach to ensure fair tax administration for both brick-and-mortar and Internet-based businesses. We commend the Court for recognizing the logical application of existing precedent to the 21st Century economy. Since being implemented, this law has resulted in the collection of roughly $500 million in State and local sales tax. This is equivalent to approximately $6.0 billion of taxable retail sales into New York that were previously made without the sales tax being collected.”
Here’s the full decision: