Court Won't Hear Appeal Of New York Internet Taxation

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The Supreme Court on Monday refused to consider throwing out New York state's taxes on Internet purchases on websites like Amazon.com, a move that could change the way Internet commerce works.

The high court refused without comment to hear appeals from Amazon.com LLC and Overstock.com Inc., in their fights against a state law that forces them to remit sales tax the same way in-state businesses do.

Web retailers generally have not had to charge sales taxes in states where they lack a store or some other physical presence. But New York and other states say that a retailer has a physical presence when it uses affiliates — people and businesses that refer customers to the retailer's website and collect a commission on sales. These affiliates range from one-person blogs promoting the latest gadgets to companies that run coupon and deal sites.

Amazon and Overstock both use affiliate programs. Amazon has been collecting sales tax in New York as it fights the state over a 2008 law that was the first to consider local affiliates enough of an in-state presence to require sales tax collection. Overstock ended its affiliate program in 2008 after the law passed.

The Supreme Court refusal to hear the websites' appeal likely will prompt more and more states to attempt to collect taxes from website purchases. Around 20 states, including New York, already have similar laws on the books. The National Council of State Legislatures estimated that states lost an estimated $23.3 billion in 2012 from being prohibited from collecting sales tax from online and catalog purchases.

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