NY Internet Sales Tax Challenged by Amazon, Overstock

The Web retailers say state officials pulled an unconstitutional fast one

Amazon and Overstock are duking it out with New York state in a court battle over the issue of collecting sales tax.

In a case being heard by the State of New York Court of Appeals, attorneys for both retailers claimed yesterday that a 2008 New York law requiring them to collect sales tax on online purchases is unconstitutional, as reported by Reuters.

A 1992 Supreme Court decision found that retailers can't be forced to collect sales tax on out-of-state purchases unless they have a physical presence in those states. But the New York law skirted that decision. The state concluded that New York-based entities that "directly or indirectly refer customers" to a retailer's Web site represent a sales presence in the state, requiring that taxes be collected.