Supreme Court Rejects Amazon, Overstock Online Sales Tax Cases

Top court rejects challenge to New York state online sales tax law.

Amazon's Pantry service may try to rival wholesale clubs such as Costco and BJ's.

Amazon's Pantry service may try to rival wholesale clubs such as Costco and BJ's.

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The U.S. Supreme Court chose the busy online shopping holiday Cyber Monday to reject two separate cases from online retailers Amazon and Overstock that challenged a New York state law requiring them to collect sales tax for e-commerce purchases.

Online retailers, brick-and-mortar shops and politicians have debated intensely in recent years about whether it is constitutional or effective for state governments to collect sales tax revenue from e-commerce purchases made from Web retailers without a physical presence in a state. The Supreme Court published no comment about its decision to reject the two cases challenging the New York state law that permits collection of online sales taxes.

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State laws vary regarding Internet sales taxes. This decision by the Supreme Court may lead companies and lobbying groups to turn up the pressure on Congress, where legislation is being considered that would clarify all states have the power to collect sales tax from online purchases. The legislation, entitled the Marketplace Fairness Act, passed the Senate in May but has since stalled in the House of Representatives.

The National Council of State Legislatures estimated states could have gained $23.3 billion in revenue during 2012 by collecting sales tax from online purchases, reflecting how states have been exploring that possibility as a potential solution to budget woes. The National Retail Federation argues e-commerce sites have an unfair advantage against brick-and-mortar stores because they do not have to collect sales tax, and that the Marketplace Fairness Act would help level the playing field. Opponents of the bill, including the conservative-leaning think tank the Heritage Foundation, argue imposing sales taxes on e-commerce could make online purchases more expensive and stifle growth of the Internet industry.

The cases that were rejected were Overstock.com v. New York State Department of Taxation and Finance and Amazon.com v. New York State Department of Taxation and Finance, U.S. Supreme Court, Nos. 13-252 and 13-259.

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