In a potentially pivotal ruling for the retail industry, the U.S. Supreme Court decided not to weigh in on efforts by Amazon.com. and Overstock.com to repeal a New York law compelling them to collect sales tax from their customers in the state.
In their decision, which was made without comment, justices rejected appeals by the two online retailers, who argue that New York’s law violated the U.S. Constitution by taxing business with no physical presence in the state. The National Council of State Legislators has estimated that states could have raised an additional $23.3 billion in 2012 by implementing similar laws.
More than half of Amazon’s revenue is already earned from jurisdictions where it collects sales tax or its equivalent, including New York and 15 other states. But the company has continued to challenge New York's law, while warning investors that “a successful assertion by one or more states or foreign countries requiring us to collect taxes where we do not do so could result in substantial tax liabilities, including for past sales, as well as penalties and interest.”
Amazon and Overstock were hoping to convince the Supreme Court to overturn a March 2013 ruling by the New York State Court of Appeals upholding the law. At that time, the New York State Department of Taxation and Finance estimated the law had resulted in the collection of roughly $500 million in state and local sales tax, equivalent to approximately $6.0 billion of taxable retail sales into New York that were previously made without the sales tax being collected.”
