The U.S. Supreme Court on Monday said it won’t hear Amazon.com’s (NASDAQ: AMZN) legal challenge to a state law that requires online retailers to collect sales taxes on purchases even where the retailers have no physical presence.
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Amazon’s shares were flat in midday trading as broader markets sought direction on a day of mixed economic data, while Overstock's shares were down 2.4%
Amazon and Overstock.com (NASDAQ: OVSK) had challenged a 2008 New York state law and asked the courts to clarify when state governments have the ability to require out-of-state shopping sites to collect sales taxes, the Wall Street Journal reported.
New York’s highest court upheld the state tax in March. The Supreme Court let that ruling stand Monday without comment. The high court’s refusal to hear the case means Amazon and Overstock have lost their challenge.
New York’s law makes it easier for the state to require online retailers to collect sales taxes even if they don’t have a physical presence in the state.
Amazon and Overstock argued in petitions to the Supreme Court that the New York law was an unconstitutional burden on interstate commerce. They also said it conflicted with a 1992 Supreme Court ruling that held state taxing authorities couldn’t force an out-of-state vendor to collect taxes unless the vendor has a physical presence in the state.
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Amazon and Overstock said New York’s approach, if left in place, would provide a roadmap for other states to impose tax-collection requirements that would stunt growth in online commerce. Overstock said in its court papers that at least a dozen other states have followed New York’s lead, according to the Wall Street Journal.
Amazon said in an e-mailed statement: “The Supreme Court already has addressed the sales tax issue, saying in (an earlier ruling) that Congress can and should act to resolve it. The Marketplace Fairness Act now pending before Congress would protect states’ rights to make their own revenue policy choices while allowing them to collect more than a fraction of the revenue that’s already owed.”
Jonathan Johnson, executive vice chairman of Overstock, said his company was “disappointed” but not necessarily surprised by the Supreme Court’s decision not to hear the case. “We knew the odds were long given the small number of cases they hear,” he said.
Johnson said Overstock will “continue to work with Congress to find a solution.