New York High Court Rejects Amazon Tax Challenge

New York’s Court of Appeal Upholds NY Amazon Tax 4-1

The whole gymnastics over the Amazon tax stems from a Supreme Court case (Quill v North Dakota) which established a bright line test that a physical presence was required before an out of state retailer should be required to collect sales tax.

In upholding the New York law, the New York high court treated Quill like a quaint notion it could easily ignore.

The world has changed dramatically in the last two decades, and it may be that the physical presence test is outdated. An entity may now have a profound impact upon a foreign jurisdiction solely through its virtual projection via the Internet. That question, however, would be for the United States Supreme Court to consider.

In contrast, the lone dissenter cited Quill that “mere advertising by the out-of-state retailer in in-state media does not” constitute having a physical presence in the state.”

It is worth recalling the origin of the statute, as it was passed during the Great Recession when New York faced a budget shortfall of almost ten percent.  The fact that the bill was known as the “Amazon Tax” demonstrates that New York was seeking the classic solution of taxing the other guy and not its citizens, which is precisely the type of abuse Commerce Clause cases have sought to stop for over a century.

Reaction from affiliate marketers was to call for a federal solution.  Performance Marketing Association Director, Rebecca Madigan stated

The PMA believes the only way to solve this problem of sales tax collection on Internet sales is via federal legislation. The Marketplace Fairness Act (Enzi, Durbin and Alexander) was just given a vote of confidence by the US Senate.  The bill has had strong bipartisan support in the House and Senate, and we are hopeful it will pass in 2013. The MFA truly levels the playing field for all brick-and-mortar and Internet retailers, and is the only solution that allows our small internet companies to resume their businesses in states where similar laws have passed.

 

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