Court won't block online sales taxes

Justices turn away appeal from top online retailers




WASHINGTON — On perhaps the busiest online shopping day of the year, the Supreme Court refused to wade into a dispute over state sales taxes for purchases on websites like, an outcome likely to prompt more states to attempt to collect taxes on Internet sales.

Monday's court action means "it might be the last Cyber Monday without sales tax," said Joseph Henchman of the Washington -based Tax Foundation.

It's all part of a furious battle — also including legislation in Congress — among Internet sellers, millions of buyers, aggrieved brick-and-mortar stores and states hungry for billions of dollars in extra tax revenue.

Local angle

Following Monday's news from the U.S. Supreme Court, state Rep. Sharon Wylie, D-Vancouver, said she still hopes Congress will pass the Marketplace Fairness Act, which would allow states to collect sales tax from online retailers.

Wylie said letting Congress draft a solution would set clear online tax rules for every state. She also said a federal Internet sales tax law would not create a new tax, but instead make sure people pay the same sales taxes they would pay when buying something in a store.

"Buying tax free on the Internet is a legal form of tax evasion," Wylie said Monday. "Part of the reason sales tax states are doing badly in funding their schools is because a lot of their sales tax is disappearing through the use of Internet sales."

Seattle-based Amazon already collects taxes on purchases shipped to 16 U.S. states, including Washington.

Washington hasn't passed an online sales tax law like the one in New York, but Washington lawmakers have joined with several other states to advocate for tax fairness between brick-and-mortar stores and online retailers.

Opponents of an online sales tax say it would be burdensome to companies, and that it would especially hurt small businesses that sell products online. Some Republicans in the U.S. House view Internet sales tax collection as a tax increase.

— Stevie Mathieu

The high court without comment turned away appeals from LLC and Inc. in their fight against a New York court decision forcing them to remit sales tax the same way in-state businesses do. This could hurt online shopping in that state, since one of the

attractions of Internet purchasing is the lack of a state sales tax, which makes some items a little cheaper than they would be inside a store on the corner.

And the effect could be felt far beyond New York if it encourages other states to act. The National Council of State Legislatures estimates that states lost an estimated $23.3 billion in 2012 as a result of being unable to collect sales tax on online and catalog purchases.

The court's refusal "allows states that have passed laws like New York's to continue doing what they've been doing," said Neal Osten, director of the Council's Washington office.

This decision came down on Cyber Monday, expected to be the busiest day of the year for online shopping. Huge numbers of people head online on the first working day after the long Thanksgiving weekend in search of Internet deals.

Web retailers generally have not had to charge sales taxes in states where they lack a store or some other physical presence. But New York and other states say that a retailer has a physical presence when it uses affiliates — people and businesses that refer customers to the retailer's website and collect a commission on sales. These affiliates range from one-person blogs promoting the latest gadgets to companies that run coupon and deal sites.