As this issue went to press, the Court of Appeals, New York’s highest court, issued its decision holding that the State’s “click-through nexus” statute does not violate the Commerce Clause or the Due Process Clause, and therefore an Internet vendor may be presumed to have nexus in New York State, and be required to collect sales tax from New York customers, when a link to the vendor’s website appears on websites of New York residents who are compensated via a commission arrangement. Overstock.com, Inc. & Amazon.com, LLC, et al., 2013 NY Slip Op. 02102 (N.Y. Mar. 28, 2013).
The New York law was amended in 2008 to provide a presumption that the definition of a “vendor,” required to collect New York State sales tax on sales to New York customers, includes an entity that enters into an agreement with a New York resident under which the resident refers potential customers, including by a link on a website, “for a commission or other consideration.” Tax Law § 1101(b)(8)(vi). Amazon and Overstock challenged the facial constitutionality of that presumption.
In brief, the Court of Appeals has now found that it was rational for the legislature to presume that New York residents who were compensated on a commission basis would seek to increase their business by soliciting New York customers, and that the ability to rebut the presumption through an annual certification “sensibly” placed the burden on the retailers to demonstrate the lack of solicitation activities.
One judge dissented, finding that the placing of links on a website was no more than advertising, and that the change in compensation method for such advertising–from a flat fee to a commission–does not change its essential nature.