Supreme Court Declines Case On Making Online Retailers Collect Sales Taxes 293
thomst writes "Robert Barnes of the Washington Post reports that the US Supreme Court has declined to hear petitions from Amazon.com and Overstock.com requesting that a decision by the New York State Supreme Court permitting that state's 2008 law requiring sales taxes be collected on Internet sales, even if the seller has no 'business presence' in New York. The New York Court of Appeals ruled that Amazon's relationship with third-party affiliates in the state that receive commissions for sending Web traffic its way satisfied the 'substantial nexus' necessary to force the company to collect taxes, and New York's Supreme Court had affirmed the ruling. The Federal high court's refusal to hear the petitions leaves the state law in effect, even though it appears to conflict with the Court's 1993 decision in Quill v. North Dakota."
Finally a flat playing ground (Score:0, Interesting)
I think this will drive omnichannel commerce and remove the 10% price advantage that companies like Amazon and Overstock enjoyed with respect to Brick and mortar stores. Competition will increase - and it can only be better for consumers.
Re:Finally a flat playing ground (Score:5, Interesting)
Except that big players like Amazon actually want online sales tax. The infrastructure to collect state and local taxes for all 50 states is beyond small retailers, thus either driving them out of business or forcing small retailers to sign up as an Amazon affiliate so they can have someone else deal with the minefield of state and local laws.
the affiliates are a sales force (Score:4, Interesting)
that's what the NY court ruled, the quill test is satisfied and there is no conflict
i can buy from lots of websites in NY that won't collect sales tax because they don't have any affiliates here
Re:Finally a flat playing ground (Score:5, Interesting)
I don't think it will help them much. Brick and mortar still has to pay property tax, utilities, etc. They still have to finance high-value real estate. They still have to have a clean, wide-open space which is aesthetically pleasing but economically wasteful. Anyway, I'm not aware of states with 10% sales tax - usually it is about half of that, and the highest seems to be 7.5% in CA. To get to 10%, I have to scroll down the list and find the highest state taxes and combine them with the highest local taxes.
Re:the affiliates are a sales force (Score:3, Interesting)
I'm torn a bit torn on this... if the are paid by 1099-misc then they are private contractors. If they are paid by W2, then they are a true "employed" sales force. I guess I don't know where the substantial nexus line is drawn.
Get Ready... (Score:4, Interesting)
Get ready for amazon.ag and overstock.ag.
At least, if I were in charge at Amazon.com or Overstock.com, I'd be looking to move the business out of the USA. As a bonus (outside of avoiding overly-burdensome US tax/regulation bureaucracy and costs), they could offer any US copyrighted work for sale from Antigua without any consideration for US copyright holders.
Strat
Re:Shocking news (Score:2, Interesting)
SCOTUS fails to act against government's financial overreach! We could NEVER have predicted THIS!
Ruling seems pretty reasonable to me. If Amazon ditched it's local 3rd party partners then Quill Corp vs North Dakota would apply to the products Amazon itself sells. As it stands Amazon's 3rd party partners are no different than dealerships are to a car company.
Re:Finally a flat playing ground (Score:5, Interesting)
I think this will drive omnichannel commerce and remove the 10% price advantage that companies like Amazon and Overstock enjoyed with respect to Brick and mortar stores. Competition will increase - and it can only be better for consumers.
Bull. Flat out bull.
People don't pick Amazon or Overstock to save on sales tax... they do it because the prices are cheaper. When I head to BestBuy and find a SATA cable listed for 25 bucks, and Amazon has it for 4.50... I don't pick Amazon because I "save" 7.25% in sales tax.
Plus those Brick & Mortar stores don't charge shipping... Shipping is almost always higher than sales tax. Now I know you are going to say "But Amazon offers free shipping for orders of $35 or more!"... So does UPS ship for free on those orders? No. Amazon eats the cost to encourage people to buy more. So why doesn't the Brick & Mortar stores offer "We pay the sales tax for all orders over $X!"??? They can reduce the price by what ever the local tax rate is (7.25%) easily enough. They don't because they know that isn't the reason why people are shopping online.
There is a good reason why the SCOTUS refused to hear this: It would be struck down. Article 1, section 9 of the US Constitution states: "No Tax or Duty shall be laid on Articles exported from any State." To put it simply: If I own a store in New Mexico, and I sell to somebody who lives in a different state... I don't collect any taxes or duties on that item. If I have a store in that state, I will have to collect taxes.
Sears & Roebuck had the same sales model as Amazon back in the late 1800's. They didn't collect sales tax either.
Sears sold things by a mail-order catalog.
Customers would read the mail-order catalog, and use a mail-in order form for items, with payment.
After receiving the order and payment, Sears would deliver the requested item.
Amazon does the same thing, just replace "Mail-order/mail-in" with "Online". Changing the way one reads a catalog, or orders items doesn't affect the law. If somebody uses a telephone, it didn't change it, neither should a computer.
Stores in town lost customers due to this, not because of "They don't collect sales tax" but because they offered so much more, at a cheaper price. The brick & mortars did have a "You get it now" features instead of having to wait 2 weeks... but for many, the savings was well worth the wait.
Re:Shocking news (Score:4, Interesting)
There is no SCOTUS ruling. SCOTUS let a (very bad) state decision stand. Why is it bad? Anything that even *leans* towards someone in state A having to pay taxes to, and which were legislated in, state B, is destructive to the very fabric of the states. Federal taxes are bad enough (for their over-reach and the incredible misuses the money is put to and the inability of the citizen to have actual effective representation in any tax matter) but add my state wanting new highways and taxing your purchase in your state to enable that, or any variation thereto... now you have well and truly screwed the pooch.
Re:Finally a flat playing ground (Score:5, Interesting)
For a second example:
Monsters University Blu-Ray + DVD Combo pack (not Collector's Edition)
Local Tax rate: 7.25%
Place: Item Price + Shipping + Tax = Total
WalMart: 29.96 + 0 + $2.17 = $32.13
Amazon: 23.29 + $3.98 + 0 = $27.27
Amazon's total price is still cheaper than WalMart's list price. Even if there was a sales tax, Amazon would still be cheaper. And if I buy a bit more, the shipping cost will be paid by Amazon.
And the "With big items, it makes a difference"... No, it doesn't. Big items are normally... Big and or heavy. Lets say a TV. The shipping cost of that isn't cheap... Very likely it's higher than what any sales tax that would apply. And either the customer pays it (still being cheaper than the B&M store), or the store eats the cost...
Re:Finally a flat playing ground (Score:5, Interesting)
Can't they just do the DocMorris trick?
Instead of selling and shipping stuff to clients, the shop registers a local sale (untaxed) and the client orders a pickup service to bring it to him. (fully automatic of course, but it's pickup, not shipping)
DocMorris did it because Germany did now allow sale by internet for pharmaceutics.
But just as you can cross the border, buy drugs and bring them home, you can also pay somebody to do that for you.
It's a fine legalese point but it worked.
Re:Shocking news (Score:3, Interesting)
1. The taxes at issue here are YOUR STATE'S taxes. It's not you (as a resident of State A) being forced to pay State B's taxes. The question is under what circumstances a business can be forced to collect State A's taxes for purchases made by residents in State A.
Perhaps, however I live in New Hampshire (which has no sales tax) and was forced to pay another state's sales tax when I purchased a gift and had it mailed to the recipient. It has nothing to do with MY STATE'S taxes. I was forced to pay State B's taxes or else deny the sale. As it was a gift, I went ahead but it's not like I got anything for my tax dollars. Talk about taxation without representation.