New York Court of Appeals upholds 'Amazon' law.

• Author: Sherr, Eileen Reichenberg

New York's highest court has confirmed that New York residents have to pay sales tax on internet sales where the vendor's only contact with the state is through in-state affiliates. On March 28, 2013, the New York Court of Appeals upheld the state's "Amazon" law against Commerce Clause and Due Process constitutional challenges made by Amazon and Overstock.com (Overstock.com, Inc. v. New York Dep't of Tax. and Fin., No. 33 (N.Y. 3/28/13)). The New York Amazon law (N.Y. Tax Law [section]1101(b)(8)(vi)), enacted in 2008, imposes nexus on (i.e., requires sales and use tax collection by) remote online retailers based on the activities of in-state "affiliates" (i.e., a vendor that pays in-state residents to actively solicit business in the state).

For purposes of analyzing the Commerce Clause argument, the Court of Appeals noted the physical presence standard from Quill Corp. v. North Dakota, 504 U.S. 298 (1992), is still applicable even though "[t]he world has changed dramatically in the last two decades" (slip op. at 8). But the court said that changing that standard to account for the emergence of the internet "would be something for the United States Supreme Courtto consider" (id.).

The Court of Appeals determined that the physical presence standard is satisfied if economic activities are performed in the state by the seller's...