Private investment firm Comvest Partners acquires the financially troubled e-retailer, which filed for Chapter 11 bankruptcy protection in March.
New York State’s highest court upholds rulings supporting an 'Amazon Tax.'
Over the objections of Amazon.com Inc. and Overstock.com Inc., New York State’s highest court Thursday upheld lower court rulings that supported the state’s so-called Amazon Tax law, which requires online retailers to collect sales tax if they do business with in-state affiliate web sites.
Overstock says it will consider bringing the case to the U.S. Supreme Court, but Amazon says it believes the best way to move forward is to support pending federal legislation, the Marketplace Fairness Act, which Amazon contends will provide uniformity in sales tax collection across the United States.
New York introduced its affiliate sales tax law in 2008, and Amazon and Overstock each contested the law in New York courts. In separate lawsuits the retailers argued that the state law violated federal law, which says states can only mandate sales tax collection by retailers with an in-state physical presence, or nexus in legal terms, such as stores or distribution centers.
But the retailers lost their lawsuits in 2009, and the state prevailed in an initial appeals court ruling in 2010. This week the state’s highest court, the Court of Appeals, also sided with the state in ruling that affiliates constituted nexus. “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,” the court said.
Jonathan Johnson, acting CEO of Overstock.com, yesterday repeated the retailer’s prior interest in possibly taking the matter to the U.S. Supreme Court. “Given that courts in other states have upheld U.S. Supreme Court precedent, and struck down similar laws, the matter appears ripe for resolution by the U.S. Supreme Court,” he says.
A 1992 U.S. Supreme Court decision ruled that states can only require retailers to collect sales tax if they have a physical presence in the state, such as a store or distribution center.
Amazon, though, also contends that the New York Court of Appeals ruling “conflicts with both the U.S. Supreme Court’s precedents,” says it is focused on supporting the Marketplace Fairness Act. That bill, which won the support of a majority of U.S. senators recently, would allow states to mandate sales tax collection by retailers with $1 million in remote sales, or sales to states where they don’t have a physical presence. Indeed, if that law is enacted, it would make affiliate tax laws moot, Amazon and others say.
Several other states, including California, Arkansas, Connecticut, Rhode Island and North Carolina, followed New York’s lead in establishing an affiliate tax law. In many cases, Overstock, Amazon and other retailers have discontinued their relationships with affiliate web sites rather than collect tax.
Amazon is No. 1 in the Internet Retailer Top 500 Guide; Overstock is No. 27.kota established that Internet retailers need only collect sales tax in states where they have a physical presence, which typically