On December 2nd, 2013 the Supreme Court of the United States denied certiorari in Overstock.com, Inc. v. New York State Department of Taxation and Finance, et al. The case involved the assessment of State sales tax against online retailers. The case, brought by Amazon.com and other online retailers, challenged New York State’s law imposing sales tax for sales made in New York. The core issue was whether the online retailers had sufficient connections to the State of New York – called “nexus” – to tax sales into the State. States do not have authority to tax commerce unless it is connected with the State itself, but the nature and threshold of what establishes that connection is a legal grey area.
The Supreme Court last ruled on nexus for State sales and use tax in 1992, in Quill Corp. v. North Dakota. In Quill, the Court required there to be some physical connection between the taxpayer and the State as a prerequisite to imposing tax. The Quill Court left open the question just how much presence was required, deferring to Congress for a long-term solution that has not yet come to pass. Congress is currently considering the Marketplace Fairness Act, which would impose a consistent national standard for when States can collect sales tax, but the bill has yet to pass the House of Representatives. In refusing the hear the Overstock appeal, the Supreme Court lets stand the Appellate decision allowing New York to impose taxes, and leaves the legal landscape of nexus undefined.
