New York – U.S. Supreme Court Asked to Review Click-Through Nexus Provisions

SALT Report 2934 – On August 23 & 26, 2013 both and filed a petition with the U.S. Supreme Court asking them to review a ruling by the New York Court of Appeals.  The ruling in question held that these retailers failed to prove that a New York statute that required online retailers with no physical presence in the State to collect New York sales and use tax was unconstitutional under the Commerce Clause and the Due Process Clause.

Specifically at issues is New York’s click-through nexus statute which creates a rebuttable presumption that a retailer is soliciting business in New York if an in-state affiliate or entity is compensated for directly or indirectly referring customers to the online retailer either by a link on an Internet website or otherwise, and the cumulative gross receipts derived from the affiliate referrals exceed $10,000.

For example, a customer buys an item from and Overstock tracks the customer’s purchase to a New York website and sends the owner of the website a referral fee.  Although Overstock has no control over the website or the website owner, New York’s law states that if the website owner is in New York, then the website is acting as a sales agent for Overstock.  This would create a nexus relationship between Overstock and New York, which would require Overstock to collect and remit sales tax.  Both Amazon and Overstock claim that the relationship with the New York website is simply an advertising relationship, not an affiliate relationship and filed a lawsuit challenging this requirement.

When Amazon and Overstock challenged New York’s law in court they both lost.  As a result, they filed an appeal with the New York Supreme Court, which they also lost. In fact, the Court ruled that New York’s law was constitutional as the “world has changed dramatically in the last two decades, and the physical presence test is outdated.”  This ruling forms the basis for the petitions for writ of certiorari that each company recently filed with the U.S. Supreme Court.

As of today, neither nor has made a public comment regarding their cases.  However, a response from the Supreme Court is due for the Overstock writ on September 23, 2013, and for the Amazon writ on September 25, 2013.

For Further Information

United States Supreme Court – v. New York State Department of Taxation and Finance Docket No. 13-252

United States Supreme Court – v. New York State Department of Taxation and Finance Docket No. 13-259