Less than a day after Amazon CEO Jeff Bezos said that his company is investing in drone technology that would allow it to take to the skies with octocopters that would deliver its packages, the US Supreme Court brought the company back to earth by refusing to hear the company's challenge to a New York State law that would force it to collect sales taxes for online purchases there.
According to the Los Angeles Times, "New York's 2008 statute requires out-of-state Internet retailers to collect sales taxes if they used affiliates in the state to direct business to their websites, such as a museum website that directed people to Amazon to buy books.
"The law treated these Web affiliates as though they were a sales force within the state. The U.S. Constitution always has allowed states to collect taxes from out-of-state companies if they have employees or offices — a nexus — physically located within a state.
"Amazon and Overstock.com Inc. appealed to the Supreme Court, arguing that the New York law was unconstitutional.
"The companies cited a 1992 Supreme Court decision involving mail-order catalogs. In that case, the court said states could collect sales taxes from retailers only when they have a physical presence in the state."
However, in refusing to hear the case, the Supreme Court has rejected that reasoning, a move that is likely to increase the introduction of similar legislation by other states, as well as increase the pressure on the US Congress to consider a national solution to the internet sales tax issue.
According to the Los Angeles Times, "New York's 2008 statute requires out-of-state Internet retailers to collect sales taxes if they used affiliates in the state to direct business to their websites, such as a museum website that directed people to Amazon to buy books.
"The law treated these Web affiliates as though they were a sales force within the state. The U.S. Constitution always has allowed states to collect taxes from out-of-state companies if they have employees or offices — a nexus — physically located within a state.
"Amazon and Overstock.com Inc. appealed to the Supreme Court, arguing that the New York law was unconstitutional.
"The companies cited a 1992 Supreme Court decision involving mail-order catalogs. In that case, the court said states could collect sales taxes from retailers only when they have a physical presence in the state."
However, in refusing to hear the case, the Supreme Court has rejected that reasoning, a move that is likely to increase the introduction of similar legislation by other states, as well as increase the pressure on the US Congress to consider a national solution to the internet sales tax issue.
- KC's View:
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This may be a setback for Amazon, which would prefer a national framework. But in the end, the company probably will be better served by having lots of fulfillment centers that can cut down on shipping times … which will compensate for the sales tax charges.
