U.S. SC declines to review online tax dispute

WASHINGTON (Legal Newsline) -- The U.S. Supreme Court will not hear arguments in a challenge over whether online retailers must pay sales taxes to states, even if they're not physically located in the states.

The nation's high court denied to review Overstock.com Inc. v. New York Department of Taxation, et al. and Amazon.com LLC, et al. v. New York Department of Taxation, et al., according to an order list released Monday.

The court did not provide any comment.

Both Overstock and Amazon filed their petitions for writ of certiorari in August.

The companies wanted the court to block a demand by the state that the company collect sales tax on goods sold there. They argued that upholding the tax law would "burden" interstate commerce.

New York, on the other hand, argued that a referral program the companies run constitutes a presence in the state and that the tax "levels the playing field" between the online retailers and those retailers physically located in the state.

The court's decision to not hear the two cases means New York can continue to tax such online retailers.

However, the issue is not completely resolved.

Other states, including California and Tennessee, have passed laws requiring out-of-state companies, including Amazon, to collect sales taxes on purchases made by their states' residents.

Congress also is considering the Marketplace Fairness Act.

The bill would enable state governments to collect sales taxes and use taxes from online retailers.

Basically, the measure would require out-of-state retailers to collect sales taxes for products sold over the Internet, but also in catalogs and on the radio or television. The taxes then would be sent to the state where a shopper resides.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.