A Denver judge has granted a request to temporarily block a 2010 law aimed at requiring remote sellers, including online merchants, to collect sales tax. The injunction comes after an August decision, where a U.S. court of appeals reversed a previous injunction that was put into place by U.S. District Court Judge Robert Blackburn. The previous injunction was reversed on the grounds that Blackburn had overstepped his authority with the injunction (see story here). The current injunction is only temporary, and will stay in place until the case is resolved further.
Litigation Costs– Amazon and Overstock have proven time and time again that they are willing to litigate these laws.
Loss of income tax revenue– Amazon and Overstock have decided to sever their ties with affiliates in state with these types of laws, reducing the amount of income that the states can tax.
Problem still remains–After a relationship with a 3rd party affiliate is severed, a company is no longer liable to collect sales tax.
No solution reached–There are two conflicting cases on affiliate nexus (New York, and Indiana), and the Supreme Court has been unwilling hear the case. The only real hope for a solution seems to lie with Congress.
The Supreme Court of the United States has declined to hear a case involving online sales tax in New York, thus letting the New York statute stand.
The Statute requires that companies like Overstock and Amazon have to collect and remit sales tax in the state even if they do not have facilities or a direct physical presence in the state. The statute operates on the basis that companies have a physical presence simply by having contracts with 3rd party affiliates within that state.
Amazon and Overstock won a similar case in Indiana back in October, meaning that there are currently two conflicting rulings on the matter.