Amazon.com has enlisted former Solicitor General Ted Olson to file a petition with the U.S. Supreme Court to stop New York State from requiring it to collect sales taxes from its customers.
The Seattle-based e-commerce giant has battled lawmakers in New York and other states over the imposition of taxes on online purchases, but has reached deals in recent years with a number of states, such as California, Pennsylvania and Texas, allowing them to collect sales taxes while they provide incentives for building warehouses and distribution centers in their states. Amazon customers in Virginia and Georgia will also be charged sales taxes beginning in September.
However, Amazon and another e-tailer, Overstock.com, have continued to wage a legal battle against a 2008 law in New York imposing a so-called “Amazon tax,” despite losing decisions in the New York State Supreme Court and the Appellate Division of the State Supreme Court (see Amazon Tax Case Could Go to Supreme Court).
Amazon reportedly filed a petition on Aug. 23 with the U.S. Supreme Court challenging New York’s law. Olson, who served as U.S. Solicitor General from June 2001 to July 2004 and is now an attorney in the Washington, D.C. office of Gibson, Dunn & Crutcher, argued that New York State’s law is unconstitutional as it violates the interstate commerce clause. Amazon spokesman Ty Rogers declined to comment, noting that Amazon has a longstanding practice of not commenting on active litigation.
Under a 1992 decision by the U.S. Supreme Court in the case of Quill Corp. v. North Dakota, the high court ruled that a company needs to have a physical presence, or “nexus,” in a state before it can be required to collect sales taxes. State officials have argued that Amazon and Overstock have nexus through affiliate Web sites around the country that steer visitors to them in return for a percentage of the sales. In response, both Amazon and Overstock have ended their relationship with affiliates in several states where sales taxes are required to be collected on Internet purchases.
However, Amazon has softened its opposition in recent years to accommodating the demands of state tax authorities and governors who argue that the diminishing sales tax revenues are harming their states’ finances. The company has even expressed support for federal legislation, the Marketplace Fairness Act, which would require the collection of sales taxes on online purchases in states that have signed on to the Streamlined Sales and Use Tax Agreement, which provides a simplified way for e-commerce sites to remit sales taxes.The Senate passed the legislation last year, but it has not advanced in the House.
Amazon has been collecting sales taxes from its New York customers since the state’s 2008 sales tax law was passed, depositing the money in an escrow account while continuing to wage a legal battle against the state’s tax department. In the case, Amazon.com, LLC v New York State Department of Taxation and Finance, Amazon.com and Overstock.com challenged the 2008 sales tax nexus presumption law in New York’s court system, but state officials have emphasized that the law remains in full force and effect. Any business with a tax collection obligation under the law must register as a sales tax vendor, they insist, and businesses already registered as sales tax vendors as a result of the 2008 legislation should continue to collect and remit sales taxes.
According to the department’s Web site, on Jan. 15, 2009, the New York State Supreme Court granted the state’s motion to dismiss Amazon’s suit alleging that the sales tax vendor presumption statute is unconstitutional. Amazon had claimed that the law violates the commerce clause of the U.S. Constitution, as well as the due process and equal protection clauses of the U.S. and New York State Constitutions. The court also dismissed a similar complaint brought by Overstock.com.
Both companies appealed the trial court’s decision, and on Nov. 4, 2010, the Appellate Division of the State Supreme Court issued a unanimous opinion confirming that the companies’ claims that the law is facially unconstitutional were unfounded. The appeals court held, however, that further discovery was needed before it could resolve Amazon and Overstock’s claim that the statute is unconstitutional as applied to their specific facts, and granted both plaintiffs the opportunity to return to the state Supreme Court to present evidence that the law is unconstitutional with respect to their business practices.
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