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 — ending what for many Americans is tax-free online shopping — is one of the most important in modern retailing. Traditional bricks-and-mortar businesses say the online retailers receive an unfair advantage by not collecting sales tax in some areas.
All but five states impose sales taxes, and an increasing number have passed legislation to force online retailers such as Overstock and eBay to begin collecting those taxes from customers.
Online retailers complained that a patchwork of state laws and conflicting lower-court decisions needed the Supreme Court's attention.
"There are billions of dollars of commerce for which we need guidance that we can rely upon," said David Blum, a Chicago tax lawyer who represents both online retailers and traditional businesses. He added: "We have evolved into an Internet world, and we need to know what's taxable and what's not."
As is its custom, the court gave no explanation for turning down petitions from Amazon and Overstock.com to review a decision by New York's highest court to uphold that state's 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, the state's highest court, said Amazon's relationship with third-party affiliates in the state that receive commissions for sending Web traffic to Amazon satisfied the "substantial nexus" necessary to force the company to collect taxes.
It has been 20 years since the Supreme Court ruled in Quill vs. North Dakota that a state's 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.
