In Overstock.com, Inc. v. New York State Dept. of Taxation & Fin., the Court of Appeals considered a 2008 amendment to Tax Law § 101(b)(8)(vi) (the “Internet Tax”) that defined a vendor as an out-of-state person selling tangible personal property or services to residents of the state, either directly or through independent contractors or representatives.

The Department of Taxation and Finance subsequently published a memorandum with guidance that “advertising alone would not invoke the statutory presumption” that an internet transaction was taxable; and that the “statutory presumption can be rebutted through proof that the residents’ only activity in New York on behalf of the seller was to provide a link to the sellers’ website and that the residents did not engage in any in-state solicitation directed toward New York customers.”

The Court of Appeals held that the statute was not unconstitutional “on its face” because “the statute plainly satisfies the substantial nexus requirement.” The Court so found because the statute requires “[a]ctive, in-state solicitation that provides a significant amount of revenue.”

Overstock.com, Inc. v. New York State Dept. of Taxation & Fin., 2013 NY Slip Op 02102 (March 28, 2013).