U.S. Supreme Court declines to hear online retailers tax case

Mon Dec 2, 2013 4:41pm EST
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By Lawrence Hurley and Patrick Temple-West

WASHINGTON (Reuters) - Amazon.com Inc and other online retailers with no physical presence in New York State must go on collecting sales tax after the U.S. Supreme Court on Monday declined to hear a legal challenge to the law that requires it.

The court order means the New York law remains intact and the high court will not, at least for now, definitively rule on the heavily contested question of whether states have the power to pass such laws.

According to the Tax Foundation, a conservative-leaning think tank in Washington, 11 other states have recently passed laws seeking to expand their tax authority over out-of-state retailers.

Amazon and Overstock.com Inc both had challenged the New York state law. Though dealt a legal blow, the companies will see little, if any, adverse earnings effects, analysts said on Monday.

"It's not positive, obviously. How negative remains to be seen," said Colin Gillis, an analyst at BGC Partners.

Although the Supreme Court does not have to explain why it declines to hear cases, it may have been swayed by New York Attorney General Eric Schneiderman, who argued in defense of the law that recent developments favored delaying consideration of the issue. He cited the possibility of congressional action and pending challenges to other state laws as reasons why it would be better to wait.

He also noted that developments in the retail industry that would make it easier for companies to collect state taxes could also render the dispute moot in the near future because the burden on businesses would not be so great.

With Congress not taking action on the issue, courts have been intervening case by case in a long-running struggle between state governments and major online retailers.   Continued...

A zoomed illustration image of a man looking at a computer monitor showing the logo of Amazon is seen in Vienna November 26, 2012. REUTERS/Leonhard Foeger