Amazon, Overstock Lose NY Sales Tax Fight

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Both, Inc. (NASDAQ:AMZN) and, Inc. (NASDAQ:OSTK), the Washington and Utah based online retailers respectively, filed a suit against the State of New York back in 2008 that demanded the retailers pay New York state sales taxes regardless of whether either company had a physical presence in the Empire State. New York claimed that if they solicit business in New York through a link to a website they were to be held accountable for sales tax.

Amazon, Overstock Lose NY Sales Tax Fight

In a fairly weak argument the two countered by suggesting that this was“creating an irrational, irrefutable presumption of solicitation of business within the state.” No, that’ really weak.

Bloomberg news reported today that:

Justice Eileen Bransten dismissed the suits in January 2009. An appeals court in Manhattan affirmed her rulings in 2010, and the Court of Appeals agreed today, saying the companies “established an in-state sales force” through agreements with affiliates who received commissions for posting links on their websites directing users to or, Inc. (NASDAQ:OSTK).

“If a vendor is paying New York residents to actively solicit business in this state, there is no reason why that vendor should not shoulder the appropriate tax burden,” the Court of Appeals said.

The point is, it doesn’t really matter when you have the federal government planning on implementing a state sales tax for the two companies, as well as millions of other online retailers at the same time as NY dismissed, Inc. (NASDAQ:AMZN) and, Inc. (NASDAQ:OSTK)’s claims today.

In a fairly ignorant attempt to “save” the traditional brick and mortar store, the U.S. Senate voted overwhelming in favor of a 50 state taxation plan to ease this unfair competition. Wal-Mart Stores, Inc. (NYSE:WMT) pays state taxes and 50 states and they’ve had no difficulty out-pricing their competition.

“Today’s vote proves that an overwhelming majority of Senators support this bipartisan legislation to level the playing field for brick-and-mortar retailers,” said Illinois Democrat Dick Durbin a big backer of the bill.

Another big backer? Amazon.

If this bill is passed,, Inc. (NASDAQ:AMZN) no longer has a reason to avoid a physical presence in the state. That means the building of massive, I mean 1 million plus square foot warehouses right outside of large cities. This infrastructure building, something they have already begun to do in Texas and California could potentially destroy the brick and mortar store. It’s too early to tell.

While Amazon will no longer be able to avoid paying taxes in most states, retailers will no longer be able to simply compete with a Seattle based company with a big warehouse in Kentucky. Now they will have to face the might of, Inc. (NASDAQ:AMZN) moving into their backyards while placing online shipping lockers in the front yard all the while keeping shipping costs down and improving efficiency. It’s almost the equivalent of letting the Death Star summer at your marina.

When Congress can  get over their bipartisan bickering and pass a non-binding resolution with 75 of 100 votes, with little lobbying from the opposition…well, it’s probably a bad idea.

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