New York’s Highest Court Upholds State’s Nexus (Affiliate) Tax Law

New York will continue to collect sales tax from out-of-state retailers that have affiliates operating within state boundaries, according to a ruling today by the New York Court of Appeals.

The court voted 4-1 today to uphold the state’s 2008 law that says having affiliates in the state gives online retailers “a substantial nexus” and requires them to pay sales tax. Amazon and Overstock had both claimed that the law is unconstitutional.

In writing the court’s majority decision, Chief Judge Jonathan Lippman said, “The bottom line is that 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.”

Overstock, which shut down its affiliate program in New York state when the 2008 law was enacted, said today that it may appeal the ruling to the US Supreme Court. Amazon said that the nexus tax issue should be handled by Congress and reiterated its support for the Marketplace Fairness Act.