New York – Court Rules that the State Can Collect Taxes from Amazon and Overstock

SALT Report 2297 – The New York Department of Taxation and Finance announced today that the state’s highest court has ruled that New York can collect sales tax from out-of-state retailers, thereby rejecting claims from Amazon.com and Overstock.com that the tax law violates the U.S. Commerce Clause and the Due Process Clause.

In a 4-1 ruling, the Court of Appeals said that a 2008 amendment meets the “U.S. Supreme Court test that demonstrates that a seller has ‘substantial nexus’ with a taxing state…and if a vendor is paying New York residents to actively solicit business in the State, there is no reason why that vendor should not shoulder the appropriate tax burden.”

The New York State Commissioner of Taxation and Finance Thomas H. Mattox said, “Today’s Court of Appeals Decision affirms New York State’s approach to 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.” The Commissioner estimates that since its implementation, the law has resulted in the collection of nearly $500 million in State and local sales tax. This amount is equivalent to $6 billion in taxable retail sales that prior to the law were made without the sales tax being collected.

In response to the Court’s decision, Overstock’s acting Chief Executive Jonathan Johnson said, “We are disappointed in today’s ruling, but confident of our position that the New York law is unconstitutional on its face and violates due process. Given that courts in other states have upheld U.S. Supreme Court precedent, and struck down similar laws, the matter appears ripe for resolution by the U.S. Supreme Court.”

Amazon.com and its attorneys have not yet commented on the decision.

For Further Information

New York Court of Appeals – Decision Numbers 33 and 34