New York’s highest court ruled Thursday the state can collect sales tax from out-of-state retailers, rejecting claims by Amazon.com and Overstock.com that the tax law violates the U.S. Constitution’s Commerce Clause.
The Court of Appeals said in a 4-1 ruling that the 2008 amendment meets the U.S. Supreme Court test that the sellers have “a substantial nexus” with the taxing state. Taxes apply when the online retailers generate at least $10,000 in annual sales to New Yorkers from in-state websites that earn commissions by bringing in potential customers through links to the big retailers.
Amazon.com, with corporate offices in Washington state, has an “Associates Program” where others put such links on their websites. Overstock.com, based in Utah, suspended its similar “Affiliates” program in New York after the state statute was enacted.
“Through this statute, the Legislature has attached significance to the physical presence of a resident website owner. The decision to do so recognizes that, even in the Internet world, many websites are geared toward predominantly local audiences,” Chief Judge Jonathan Lippman wrote. “Viewed in this manner the statute plainly satisfies the substantial nexus requirement.”
“The bottom line is that if a vendor is paying New York residents to actively solicit business in this state, there is no reason why that vendor should not shoulder the appropriate tax burden,” Lippman wrote. Judges Victoria Graffeo, Susan Read and Eugene Pigott Jr. agreed.
New York’s sales tax is 4 percent and all its counties and New York City add an additional tax ranging from 3 percent to near 5 percent. Both apply to applicable Internet sales, according to the state Department of Taxation and Finance.
Tax Commissioner Thomas Mattox said the ruling affirms New York’s approach to fair tax administration for both brick-and-mortar and Internet-based businesses. Since the law was implemented, it has resulted about $500 million of state and local sales taxes collected, representing about $6 billion of sales into New York, he said.
Overstock.com chief executive Jonathan Johnson said the ruling has no operational impact on that company because it ended those affiliate relationships in 2008.
“It just means the court battle will likely continue,” Johnson said, suggesting it’s time for the U.S. Supreme Court to sort out conflicting state laws and rulings. “It seems like an issue that’s ripe to weigh in on — which of the state courts do it correctly.”
Amazon and its attorney did not immediately respond to requests for comment.
In his dissent, Judge Robert Smith wrote that mere advertising by an out-of-state retailer through in-state media does not constitute a physical presence or sufficient nexus, concluding links from the New York websites to big online retailers are simply that.
Lippman wrote that the world has changed dramatically over the past two decades, where an entity can have a profound impact elsewhere through the Internet, and the physical presence test may now be outdated. “That question, however, would be for the United States Supreme Court to consider,” he wrote.
Apple and Google Face UK Investigation Into Mobile Browser Dominance
Apple and Google aren't giving consumers a genuine choice of mobile web browsers, a British watchdog said Friday in a report that recommends they face an investigation under new U.K. digital rules taking effect next year.
The Competition and Markets Authority took aim at Apple, saying the iPhone maker's tactics hold back innovation by stopping rivals from giving users new features like faster webpage loading. Apple does this by restricting progressive web apps, which don't need to be downloaded from an app store and aren't subject to app store commissions, the report said.
"This technology is not able to fully take off on iOS devices," the watchdog said in a provisional report on its investigation into mobile browsers that it opened after an initial study concluded that Apple and Google effectively have a chokehold on "mobile ecosystems."
The CMA's report also found that Apple and Google manipulate the choices given to mobile phone users to make their own browsers "the clearest or easiest option."
And it said that the a revenue-sharing deal between the two U.S. Big Tech companies "significantly reduces their financial incentives" to compete in mobile browsers on Apple's iOS operating system for iPhones.
Both companies said they will "engage constructively" with the CMA.
Apple said it disagreed with the findings and said it was concerned that the recommendations would undermine user privacy and security.
Google said the openness of its Android mobile operating system "has helped to expand choice, reduce prices and democratize access to smartphones and apps" and that it's "committed to open platforms that empower consumers."
It's the latest move by regulators on both sides of the Atlantic to crack down on the... Read More