Supreme Court rebuffs appeal of 'Amazon tax' law

The US Supreme Court deals Amazon and Overstock a blow, declining to hear a case that appeals New York's law that forces online retailers to collect sales tax.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
2 min read
A worker loading orders in one of Amazon's factories. Amazon

The US Supreme Court on Monday declined to hear an appeal by online retailers to throw out a New York state law that requires their customers to pay state sales tax on online purchases, according to The Associated Press.

The justices rejected the appeals without comment. Amazon and Overstock argue in their appeals that a New York state law requiring them to collect sales tax on items sold on their sites to consumers living in New York violates the Constitution. The e-commerce Web sites argue that customers shouldn't be forced to pay state sales tax since these companies do not have a physical presence in New York. A 2008 New York state law considers local affiliates enough of a presence to collect the sales tax.

Web retailers generally have not had to charge sales taxes in states where they lack a store or some other physical presence, The Associated Press story states. But New York and other states say that a retailer has a physical presence when it uses affiliates, which are people or businesses who refer customers to the Web site.

New York was one of the first states to pass such a law, dubbed the "Amazon tax," which requires sales tax collection on online purchases when an affiliate is used to sell goods. Retailers claim they lose $23 billion in uncollected taxes every year from taxes not collected from online sales.

Now that the Supreme Court has refused to hear Amazon's and Overstock's appeals in New York, it's likely that more states will pass similar laws.