WASHINGTON – The Supreme Court on Monday declined to get involved in state efforts to force online retailers such as Amazon.com to collect sales tax from customers even in places where the companies do not have a physical presence.
The issue is one of the most important in modern retailing. Traditional brick-and-mortar businesses say the online retailers receive an unfair advantage by not collecting sales tax in some areas. Online retailers complained that a patchwork of state laws and conflicting lower court decisions needed the Supreme Courts attention.
As is its custom, the court gave no explanation for turning down petitions from Amazon and Overstock.com to review a decision by New Yorks highest court to uphold that states 2008 law requiring sales tax collections.
Seattle-based Amazon has no offices, distribution centers or workforce in New York. But the New York Court of Appeals said Amazons relationship with third-party affiliates in the state that receive commissions for sending Web traffic its way satisfied the substantial nexus necessary to force the company to collect taxes.
It has been 20 years since the Supreme Court ruled in Quill v. North Dakota that a states efforts to require tax collections from out-of-state companies violated the Commerce Clause of the Constitution. It said the necessary substantial nexus exists when the out-of-state retailer has a physical presence in the state.
The ability to make sales without collecting sales tax has been key to the success of Amazon and other online retailers, and the company has been fighting the state efforts one at a time.
But as Amazon has embarked on building distribution centers around the country to deliver goods more quickly – establishing the physical presence requirement – it has become subject to more state laws.
According to its website, Amazon now collects taxes on sales in 16 states.
The Supreme Courts Quill decision said Congress was in a better position than the court to provide uniformity in state tax collection requirements, but there has been little progress.
The federal government does not impose sales tax.
The Senate in the spring passed the Marketplace Fairness Act of 2013, which requires companies that surpass $1 million in Internet sales outside the states where they are located to collect every states sales tax.
But the future of the bill is uncertain in the House. Technically, if a retailer does not collect sales tax, consumers are supposed to pay their applicable tax to their home states anyway on their own, but most people never do. Because of that fact, some Republicans in the House said agreeing with the Senate bill would result in tax increases for constituents.
In Indiana, only entities with stores or warehouses here are required to collect sales tax. Amazon, which now has four Indiana facilities, will begin collecting Indianas 7 percent sales tax next year, under a deal arranged by former Gov. Mitch Daniels in 2012.