The Tax Foundation and the National Taxpayers Union are urging the U.S. Supreme Court to hear an appeal involving New York’s Internet sales tax law. New York is one of about a dozen states that have laws requiring out-of-state Internet companies to collect sales taxes, according to the Tax Foundation.
The state laws are an attempt to get around a federal law that prohibits collection of state sales taxes if a company doesn’t have a physical presence in the state. The New York law deems an out of state taxpayer to be “in” the state if the taxpayer has an agreement with an in-state entity to pay for referrals. In a “friend of the court” brief, the two anti-tax organizations argue the efforts to collect sales taxes are “burdens to interstate commerce.”
Overstock.com and Amazon.com filed suit against the 2008 New York law, but New York’s highest state court ruled the law was valid. The companies appealed to the U.S. Supreme Court, which is deciding whether to hear the case.
Since the lawsuit was filed, Amazon.com has reversed course and is now backing federal legislation that would allow state sales taxes to be collected on Internet purchases. The U.S. Senate has approved the federal legislation and a roadblock in the U.S. House was lifted last week when House Judiciary Committee Chairman Bob Goodlatte, R-Va., set out a set of conditions for consideration of the bill.