The lack of sales tax on internet purchases has been a major boon to the e-commerce industry, and with falling and free shipping costs, consumers have quickly grown accustomed to this. Recent laws though put this at risk, and that is prompting internet e-commerce giant Amazon (NASD: AMZN) into action.
The issue of taxing internet sales is so large in fact that Amazon founder Jeff Bezos is taking the high-stakes legal battle to the US Supreme Court, and has hired one of Washington’s most prominent lawyers Ted Olson to fight the taxation of its shoppers in New York state.
Amazon wants the court to review a case about the most incendiary political issue in American retail: the complaint by bricks-and-mortar stores that online rivals gain an unfair advantage because they do not have to charge sales tax. Mr. Olson filed a petition to the Supreme Court on August 23 urging the justices to take on a case where Amazon has challenged the New York tax department’s demand that it collect tax from shoppers in the state.
Amazon’s Supreme Court petition argues that the law is unconstitutional. “This case raises issues of exceptional importance because [a lower court’s] decision…leaves in place a state law that will significantly and unduly burden interstate commerce, provides a road map for other jurisdictions to inflict similar burdens on interstate commerce, and threatens to sow widespread confusion,” it says.
Jason Brewer of the Retail Industry Leaders Association, a bricks-and-mortar lobby group that has pushed for online sales tax, said: “It is puzzling that Amazon would choose to collect sales taxes in states like California, Texas and Pennsylvania to name just a few while litigating in New York.” New York may be a special case because of New York City. It is the US’s biggest city with a population of 8m, and a sales tax of 8.875 per cent, but Amazon does not need warehouses in New York state to serve it, because it can use facilities in New Jersey, where it is planning to build at least one distribution center.
Amazon has not commented on the litigation as it is firm policy to not do so, but expect this to garner significant attention and resources in the coming months, as this battle could be monumental for the firm.
