In a case that has far-reaching ramifications because of the exponential expansion of cyberspace in general, and because of the growth of commerce over the Internet in particular, the New York Court of Appeals has rejected challenges by two major online retailers to New York’s "Internet tax,"1 which requires collection of a sales tax on online purchases made by New York residents.
The court, in Overstock.com v. New York State Dept. of Taxation & Fin.,2 was not persuaded by arguments by Amazon.com and Overstock.com that the Internet tax, §1101(b)(8)(vi) of the New York Tax Law, was unconstitutional on its face. The U.S. Supreme Court ultimately may have the opportunity to opine on the constitutionality of the Internet tax. For now, however, the New York Court of Appeals’ decision will allow the state to continue to collect the Internet tax from online retailers.
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