Last week, the New York Court of Appeals ruled in a case brought by Amazon and Overstock.com that non-resident sellers offering products through a New York website will be required to collect New York sales taxes on sales made into the state. This collection requirement would apply even though the out-of-state business has no other presence in the state. In its ruling, the court analogized selling through a New York-based website to having a physical present in the state: “ … 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.” The court held that an online presence in the state was a substantial nexus to New York.
This is a continuation of the state-by-state battle over what has become known as the “Amazon tax.” Last year we reported that the Illinois Amazon tax was judged unconstitutional. That case was appealed by the state and currently remains in litigation.
We continue to believe that all businesses must pay their fair share of taxes, and that all states should be allowed to require businesses within their jurisdiction to collect and report taxes, as determined by state law. However, we do not believe that the states should be allowed to require out of state businesses, with no physical presence in that state, to collect and remit these taxes. This is an unfair approach on which the United States Supreme Court has already spoken.
We believe that many small Internet businesses will simply cut ties with instate websites to avoid this new compliance burden. For small businesses, the issue is the additional cost of collecting, reporting and remitting tax to multiple states in which they do not have a real presence. We believe this poses an unreasonable burden on small businesses and will cause many small businesses to withdraw from interstate commerce.
