The US Supreme Court on Monday declined to hear an appeal by Amazon.com Inc. to relook a New York State law that requires online retailers to pay sales tax in the state.
The Supreme Court dismissed without comment on the case by Amazon and another online retailer, Overstock.com – both companies had filed separately with the Court, asking if the move to tax online sales in New York was valid under the U.S. Constitution.
The case could set a precedent in the US, where an estimated $23bn a year is lost in uncollected sales tax. Amazon argued it shouldn’t pay the tax as it doesn’t have a physical presence in the state.
Amazon said New York’s regulations “subject internet retailers to significant burdens of pain on serious civil and criminal penalties”, according to a court filing.
The New York law says sales tax must be collected if a local resident is used to solicit sales online – which Amazon does, as it partners with local businesses to host ads promoting the retailer.
A lower court ruled this effectively creates an “in-state sales force”.
Overstock.com suspended its local affiliate programme once the law was passed to avoid paying sales tax.
New York state lost an estimated $1.8bn in uncollected sales tax in 2012, according to the National Conference on State Legislatures.
With the case rejected by the Supreme Court, Amazon and other online retailers will now be required to pay sales tax for goods sold in New York, shaving off a key advantage they enjoyed vis-a-vis with traditional retailers that operate physical stores.