The New York Court of Appeals [official website] ruled [decision, PDF] on Thursday that New York may impose a sales tax on out-of-state retailers that do business within the state. At issue in the case was a 2008 state tax law known as the Internet Tax [text, PDF], which places a sales tax on out-of-state online businesses that generate at least $10,000 in annual sales to New Yorkers from in-state websites. The plaintiffs in the case, Amazon.com and Overstock.com [corporate websites], argued that the Internet Tax violates the Commerce Clause [text] of the US Constitution. Chief Judge Jonathan Lippman, writing for a majority of the court, rejected Amazon and Overstock's argument, declaring that the Internet tax is valid because it meets the US Supreme Court's requirement that a sufficient nexus exist between the sellers and the state imposing the tax:
Through this statute, the Legislature has attached significance to the physical presence of a resident website owner. The decision to do so recognizes that, even in the Internet world, many websites are geared toward predominantly local audiences. Viewed in this manner the statute plainly satisfies the substantial nexus requirement.One judge dissented, saying that the connection between the sellers and New York was too remote to meet the substantial nexus test.
The Commerce Clause [JURIST news archive] has been a subject of heated legal controversy recently, especially in the wake of the Supreme Court's high-profile ruling [text, PDF; JURIST report] on the Patient Protection and Affordable Care Act (PPACA) [JURIST backgrounder] last June. In July JURIST guest columnist Robin West opined [JURIST op-ed] that Chief Justice Roberts's conviction that the individual mandate is not authorized by the Commerce Clause is evidence of a new, anti-collectivist conception of individual rights that is growing in popularity. In September 2011 JURIST guest contributor Steven Schwinn argued [JURIST op-ed] that the US Court of Appeals for the Eleventh Circuit [official website] erred when it struck down part of the PPACA [JURIST report] under the Commerce Clause.