New York defends its 'Amazon tax' in court

Thu Feb 7, 2013 6:21am IST

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008. REUTERS/Rick Wilking/Files

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008.

Credit: Reuters/Rick Wilking/Files

Related Topics

Stocks

   

REUTERS - Major online retailers Amazon.com Inc (AMZN.O) and Overstock.com (OSTK.O) on Wednesday told a New York state court that they should be allowed to not charge state sales tax.

The case, in the State of New York Court of Appeals, represents one of the first legal tests of recent "Amazon taxes" meant to make online retailers start charging state sales taxes.

Amazon and Overstock attorneys argued before the court that a 2008 New York law requiring companies with affiliates in the state to collect sales tax was unconstitutional.

For New York, millions of dollars in tax collections ride on the court's decision, expected by June.

Retailers with a physical presence in any state must remit sales tax on purchases made either in a store or online.

But a 1992 Supreme Court decision, Quill Corp v. North Dakota, said retailers lacking a "nexus" of operation in a state need not collect sales tax.

The New York law applies the nexus concept in a novel way. It says that websites with purchase buttons for Amazon or other national retailers get fees based on sales delivered that make the sites local solicitors for the larger retailers.

Lower courts have sided with the state and found in favor of the law. But on Wednesday, some members of the five-justice panel took clear interest in the companies' argument that web referrals do not constitute a local sales force, but rather are something more akin to buying newspaper advertising.

The idea that putting an ad in the newspaper makes the paper an advertiser's sales force is "absurd" argued Randy Mastro, a partner with law firm Gibson Dunn, representing Amazon.

Steven Wu, attorney for the state, said web purchase buttons differ from advertising. "Advertising gets people to the door of a business, soliciting gets them to the register," said Wu.

Between the law's passage in 2008 and February 2012, online-only retailers collected and remitted to New York $360 million in sales tax on more than $4 billion in transactions, according to the state's Department of Taxation.

Legislation that could resolve these issues has been introduced in the U.S. Congress, but has not come to a vote. The issue may end up before the U.S. Supreme Court. Mastro said the case will be appealed no matter the result.

The cases are Overstock.com v. New York State Department of Taxation and Finance, New York State Court of Appeals No. APL-2012-00017, and Amazon.com v. New York State Department of Taxation and Finance, New York State Court of Appeals No.APL-2012-00045.

(Reporting by Nanette Byrnes; Editing by Kevin Drawbaugh and Bob Burgdorfer)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

ALIBABA IPO

Reuters Showcase

Ellison Quits

Ellison Quits

Oracle's Ellison steps aside, co-CEOs Catz and Hurd take over.  Full Article 

Cutting Jobs

Cutting Jobs

Microsoft lays off 2,100 as part of earlier job cut plan.  Full Article 

Robot Tech

Robot Tech

Qualcomm shows off robot technology, but mum on China dispute.  Full Article 

Hardware Push

Hardware Push

Amazon expands Kindle lineup, boosts price of basic e-reader.  Full Article 

Banking on PlayStation

Banking on PlayStation

Sony hopes for PlayStation profit boost as smartphones struggle.  Full Article 

Apple Update

Apple Update

Bug delays Apple's HealthKit availability on iOS 8.  Full Article | Related Story 

Infosys -Huawei Deal

Infosys-Huawei Deal

Infosys partners with China's Huawei for cloud-based projects  Full Article 

New iPads

New iPads

Apple to unveil new iPads, operating system on Oct. 21 - report.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage