The addition of the internet and online market has caused a great deal of disagreement when it comes to sales tax. Online retailers do not wish for the added burden of state tax on purchases that “brick-and-mortar” retailers must collect. It is estimated that states currently miss out on collecting $11 billion in revenues without charging sales tax for online sales, so naturally most states are all for “fairness” in levying sales tax for in- and out-of-state retailers.
A New York appeals court ruled that Amazon.com and most other online retailers must collect state sales taxes when they pay affiliates to promote links to their products. Amazon and Overstock.com sought review by the Supreme Court claiming that the ruling “provides a road map for other state legislatures to enact similarly burdensome legislation.” The case made its way to the US Supreme Court last December, but they refused to hear the case and upheld the New York ruling.
State Attorney General Eric Schneiderman stated, “Today’s Supreme Court decision validates New York’s efforts to treat both online and brick-and-mortar retailers equally and fairly.”
Pressure is being put on Congress to resolve the issue. Last May, the Senate passed the Marketplace Fairness Act to allow states to levy state and use taxes on out-of-state retailers. Many other states have similar laws as New York, but states will also hesitate to levy taxes on online/remote retailers, since they will frequently stop supporting business in states with “burdensome” taxes.
The NY state court has noted: “The world has changed dramatically in the last two decades, and it may be that the physical presence test is outdated…An entity may now have a profound impact upon a foreign jurisdiction solely through its virtual projection via the Internet.”
If you sell on the internet, this will be an import topic to follow as you may soon be required to collect tax for your online sales.