The Supreme Court today declined to interfere in state efforts to force online retailers to collect sales tax from customers even in places where the companies do not have a physical presence, or "nexus."
The case involved a decision by New York’s highest court to uphold that state’s 2008 law requiring sales tax collections.
Amazon has no offices, distribution centers or workforce in New York, but the New York Court of Appeals said Amazon’s relationship with third-party affiliates in
the state that receive commissions for sending it Web traffic satisfied the “substantial nexus” necessary to force the company to
The Quill Case
It has been 20 years since the Supreme Court ruled in Quill v. North Dakota
that a state’s efforts to require tax collections from out-of-state
companies violated the Commerce Clause of the Constitution. It said the
necessary “substantial nexus” exists when the out-of-state retailer has a
“physical presence” in the state.
But that decision came before the advent of eCommerce, and the New York court said the old test may now be outdated. “An
entity may now have a profound impact upon a foreign jurisdiction
solely through its virtual projection via the Internet,” the court
As noted in The Washington Post, online retailers complained that a patchwork of state laws and
conflicting lower court decisions needed the Supreme Court’s attention. The Supreme Court’s Quill decision said Congress was in a
better position than the court to provide uniformity in state tax
collection requirements, but there has been little progress.
The Senate in the spring passed the Marketplace Fairness Act of 2013,
which requires companies that surpass $1 million in Internet sales
outside the states where they are located to collect every state’s sales
tax, but the future of the bill is uncertain in the House.