This past year has seen the creation of new concepts in taxation which reflect both political change and the expanding importance of the Internet. As for politics the governor’s 2 percent real property tax cap program has been widely accepted by local taxing authorities but has recently been challenged as unconstitutional. As for the Internet, the Court of Appeals just rejected a constitutional challenge to taxing the sale of goods and services over the Internet to New York State residents. And lastly the taxation and condemnation of unique pieces of real property has also been reviewed by the courts.

The Internet Tax

The increasing use of the Internet to market and sell goods and services to residents of this state is changing the way we look at the threshold issue of "presence" both from the standpoint of the assertion of personal jurisdiction1 and the power to tax retail sales. In Overstock.com v. New York State Department of Taxation2 the Court of Appeals rejected a constitutional challenge to Tax Law §1101(b)(8)(vi) (the Internet tax). After discussing earlier U.S. Supreme Court cases3 involving attempts to tax mail order sales, the court noted that "The world has changed dramatically in the last two decades and it may be that the physical presence test is outdated. An entity may now have a profound impact upon a foreign jurisdiction solely through its virtual projection via the Internet."

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