US Supreme Court declines Amazon's appeal on e-commerce taxation

Yesterday, which was Cyber Monday and the biggest online shopping day of the year, also saw a major development that would affect internet commerce.

The US Supreme Court turned down an appeal for a hearing from Amazon and Overstock that could have saved New Yorkers from paying state sales tax on online purchases.

The two online retailers had been challenging the legality of a state law under which they need to collect state sales tax on purchases made through their web portals.

Under the law passed in 2008 such retailers are required to collect sales tax if they maintained so-called affiliates inside the state.

A blog or site offering coupons and deals for a commission would be an affiliate.

According to commentators, the decision of the court turning down the appeal could see more states require e-commerce sites collect taxes online transactions. So far such laws are in the books of 20 states.

However, there may be other options open to online retailers if their issue was consistency, according to an opinion piece in sfgate.com. It said online retailers could approach Congress for setting a national standard on the rules for taxing online purchases.

The senate recently passed the Marketplace Fairness Act of 2013, under which companies with online sales of $1 million or more would need to apply state sales taxes to purchases.

The case for exemption of purchases to encourage the growth of a fledgling means of commerce was obsolete, the site said. With online sales flourishing, ecommerce businesses no longer required any protection from competition from brick-and-mortar stores.

Some commentators say e-commerce businesses needed to lose the sales-tax advantage thy had over stores that actually employ people, support local charities and pay property taxes.

Sixteen states, including California, applied sales taxes to online purchases, though they differed on items to be taxed and the threshold to trigger it.

Laws across states have attempted to align with a 20-year-old Supreme Court ruling that stated purchases from an out-of-state retailer could be taxed only if there existed a "substantial nexus" between the company and the state.

Though at the time, the definition basically meant a physical presence, the interpretation had been made obsolete by the evolution of the internet.

''A retailer with a website and smartphone application clearly has an instant nexus with customers in all 50 states,'' the SFGate article said.