‘Amazon Tax’ survives NY court ruling

On Monday, the New York State Court of Appeals ruled that, even though companies such as Amazon.com and Overstock.com don't own any stores in the state, they must be subject to sales taxes as if they were. The decision comes after six years of legal battles in which the online mega-retailers argued against  sales tax laws being aimed directly at their type of business model.

For years, Amazon.com has provided consumers with a market for a wide variety of goods at low prices. One of the reasons that the internet-based retailer was able to keep prices so low, though, was the fact that it avoided many state tax laws as a result of operating without an actual brick-and-mortar location. Such a policy did not go unnoticed by state governments. As a result, many states, including New York, enacted legislation that requires internet sales to be subject to sales tax. In 2008, both Amazon.com and Overstock.com sued the New York Department of Taxation and Finance in an effort to fight the legal measure.

In the end, New York's highest court ruled 4-1 that all business that sell to customers in the state must be taxed as such.

"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," Chief Judge Jonathan Lippman wrote, according to the court transcript.

While states could not legally tax online merchants through the U.S. Constitution's Commerce Clause, they were able to link taxation to the company through affiliates such "Amazon Associates," which earn commission by driving customers to the website.

The decision is a huge blow to online retailers nationwide and should serve as a reminder for businesses to stay aware of new developments in taxing. The best way to do this is to seek out the services of a Phoenix small business attorney.

Categorised in: Business Law

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