The Ottumwa Courier

AP National

December 3, 2013

Supreme Court won't stop NY's Internet taxation

(Continued)

In October, for example, the Illinois Supreme Court threw out a law that would tax certain Internet sales, saying the "Amazon tax" violated federal rules against discriminatory taxes on digital transactions. State officials are considering whether to appeal their case to the U.S. Supreme Court.

And the big Internet sellers are hardly giving ground after Monday's Supreme Court result. Both Amazon and Overstock said they plan to press their case in Congress in hopes of getting a federal decision on Internet sales taxes that would apply to every state uniformly.

Amazon supports the Marketplace Fairness Act, which passed the Senate in May. That law would require states to simplify their sales tax laws in exchange for being able to tax Internet sales from companies with more than $1 million in sales annually.

The bill is now in the House, where there is no guarantee it will make it to a vote. Supporters say it is needed out of fairness to stores operating at a price disadvantage to online operations that don't charge sales taxes, while some lawmakers oppose the change as the imposition of a new tax.

Will more states enact laws after the Supreme Court result?

"States might take courage from this non-decision, but they shouldn't," said Jonathan Johnson, executive vice chairman of Overstock.com. He pointed out that the company pulled its New York affiliate operations in 2008 after that state passed its law and that other companies fled Illinois after that state passed a similar law.

Internet companies will simply operate in states that have laws advantageous to their businesses, Johnson said. "Unless all the states choose to do this, I think there will be a strong affiliate market" somewhere, he said.

Henchman, who is vice president, state projects for the Tax Foundation, a national tax research association, noted that the sales tax issue may become moot for Amazon if it goes through with its drone program for same day delivery. Amazon.com has said it's working on a self-guided drone with a range of 10 miles that could deliver packages to customers in areas remotely.

"In order to do this, they're going to have to build a lot more warehouses," Henchman said, giving them in-state presences in those markets and requiring them to collect state sales taxes.

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Follow Jesse J. Holland on Twitter at http://www.twitter.com/jessejholland

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