The U.S. Supreme Court has declined to consider the constitutionality of New York’s “Amazon” click-through sales tax nexus law, leaving it in effect and emboldening other states’ similar efforts. Unless federal legislation is enacted, interstate retailers are facing an era of unprecedented uncertainty as states seek to apply their new laws to compel tax collection by out-of-state retailers.
The Supreme Court of the United States has issued an order denying the petitions for certiorari of Amazon.com, LLC and Overstock.com, Inc. appealing the New York State Court of Appeals decision in Overstock.com, Inc. v. New York State Department of Taxation and Finance, 20 N.Y.3d 586 (2013), which upheld New York’s so-called “Amazon” sales and use tax click-through nexus law. The law presumes that collection of tax is required of out-of-state retailers that make sales via paid referrals from in-state persons, whether by the internet or otherwise. Absent federal legislation giving states the power to require collection of tax by out-of-state retailers, states are likely to imitate and expand New York’s approach to try to compel tax collection by out-of-state retailers. How these laws will apply in practice is unclear and may create significant uncertainty for online and catalog retailers.U.S. Supreme Court precedent under the Dormant Commerce Clause holds that states may not impose sales or use tax collection obligations on retailers that lack physical presence in the state. Typically, the test looks to the physical presence of the retailer’s own employees and property, but the physical presence of third parties may be imputed to a retailer if a third party’s physical presence is significantly associated with the retailer’s ability to establish or maintain the in-state market. Such...
