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U.S. court refuses to hear online retailers’ tax case

The court ruling must

Amazon Amazon.com Inc and other online retailers with no physical presence in New York State must go on collecting sales tax after the U.S. Supreme Court on Monday declined to hear a legal challenge to the law that requires it.

The court order means the New York law remains intact and the high court will not, at least for now, definitively rule on the heavily contested question of whether states have the power to pass such laws.

According to the Tax Foundation, a conservative-leaning think tank in Washington, 11 other states have recently passed laws seeking to expand their tax authority over out-of-state retailers.

Amazon and Overstock.com Inc both had challenged the New York state law.

New York Attorney General Eric Schneiderman said that developments in the retail industry that would make it easier for companies to collect state taxes could also render the dispute moot in the near future because the burden on businesses would not be so great.

With Congress not taking action on the issue, courts have been intervening case by case in a long-running struggle between state governments and major online retailers.

As a result of the high court’s inaction, the nationwide patchwork of online sales tax collection will remain and more court fights may arise, tax lawyers said on Monday.

In a March ruling for the state government, the New York State Court of Appeals said Amazon and Overstock could be compelled by the state to collect tax from online sales. Both companies sought the high court’s review of the ruling, citing the Commerce Clause of the Constitution, which limits the power of states to regulate interstate commerce.

In October, the companies won and the state lost in a similar tax case in the Illinois state supreme court, presenting split decisions among two of the most populous states.

The state’s revenue agency has until mid-January to decide whether or not to appeal this ruling to the Supreme Court.

Seattle-based Amazon has been fighting one-on-one battles with the 50 states and the District of Columbia for years over sales tax. It now collects sales taxes in 16 states.

The U.S. government has no national sales tax. Proposed legislation in Congress would give all states the power to enforce their sales tax laws on Internet retailers. In May, the Senate approved a bill, but it has stalled in the House of Representatives.

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