The U.S. Supreme Court has turned down appeals by online retailers to be exempted from New York's sales tax law, despite the companies having no physical presence in the Empire State.
Amazon.com and Overstock.com had appealed a decision from New York's highest court which held that both companies need to collect sales tax from their customers -- regardless of the companies not having any physical operations in the state, reports Entrepreneur.
What does this development mean for your small business' online sales?
Amazon Still Has to Charge Sales Tax in N.Y.
New York's highest court (called the New York Court of Appeals) upheld the state's "Amazon tax" in April, requiring sites like Amazon.com and Overstock.com (or "O.co") to charge their customers New York sales tax, regadless of their actual presence in the state. With the U.S. Supreme Court refusing to hear Amazon's appeal, that New York high court ruling stands.
Amazon has already started collecting sales tax in states where it has distribution centers or headquarters. But with laws like New York's, the legal climate has begun to support businesses that always collect sales tax.
There is currently no federal law that requires sales tax collection for Internet retailers, and the Marketplace Fairness Act is still mired in Congress. Lobbyists for brick-and-mortar retailers have been pressing Congress to take decisive action on this Act, as it would level the playing field between companies like Amazon and Walmart, reports USA Today.
Until that happens, online retailers are left to deal with a patchwork of state laws, which in New York means that most online retailers must collect New York sales tax from customers in the state.
How Does This Affect Your Online Business?
If you're a small business owner who conducts out-of-state sales to customers in states like New York, you may need to modify your online sales practices.
The New York "Amazon" tax generally applies to vendors that both:
- Enter into purchase agreements with New York residents and
- Gross more than $10,000 from New York customers in the preceding four tax quarters.
For small businesses whose online sales do not account for more than $10,000, regardless of the state, the New York law should not affect tax liability.
However, if you ring up more than $10,000 in sales with New York customers, or your business is growing rapidly, you may want to consider speaking with an experienced tax attorney on how to handle New York sales tax.
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- Amazon Rejected by U.S. High Court on New York Sales Tax (Bloomberg)
- The Death of the Tax-Free Internet? (FindLaw's Technologist)
- Internet Tax Likely Coming Whether You Like it or Not (FindLaw's Free Enterprise)
- Do You Have to Pay Sales Tax on Internet Purchases? (FindLaw)