The highest court in New York has given its support to a remote seller law, by which they mean one that applies to people who conduct business over the Internet. In this case, it is those who conduct business exclusively over the Internet and had no employees within the state of New York.
The most relevant part of the law reads, “a person making sales of tangible personal property or services taxable under this article shall be presumed to be soliciting business through an independent contractor or other representative if the seller enters into an agreement with a resident of this state under which the resident, for a commission
or other consideration, directly or indirectly refers potential customers, whether by a link on an internet website or otherwise, to the seller”.
However as with most laws, this one does not have unanimous approval, as online retailers like Amazon and Overstock have appealed the case. They believe that a physical presence is required to actually collect sales tax, and have offered an Associates’ Program, where third parties would place links to go to the online retailers’ websites, and then they would be compensated by a commission payment. Most of the Associates would say they are from New York.
These Online Retailers’ were unable to convince the Court of their argument that the law was unconstitutional. According to Business Advocate, they had said the law was in violation of the Commerce Clause “because it subjected remote online sellers to New York sales tax.” It is also worth noting that this is not the first case to deal with Internet sales taxes; it was preceded by the U.S. Supreme Court case Quill Corp. v. North Dakota, which upheld what is known as the “bright line test.” This states that, “whether or not a State may compel a vendor to collect sales or use tax may turn on the presence in the taxing State of a small sales force, plant, or office”. This is what the Court in New York had interpreted differently.
New York’s Court had claimed that physical presence consists of economic activity being performed in the State, which would apply in regard to the aforementioned Associates. According to Business Advocate, “through this statute, the court reasoned that the New York Legislature believed there is significance to the physical presence of a resident website owner.”
The law, the Marketplace Fairness Act of 2013, was an attempt to level the playing field, because before people would just buy things over the Internet, creating an uphill battle for those who sold items in person, since they had to collect sales taxes. At some point, we will know if the Internet completely replaces physical stores as the world continues its advance.