Section of Taxation Publications

VOL. 63
NO. 4

Contents | TTL Home


Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.


Is the Tax Holiday Over for Online Sales?

Zelda Ferguson

The explosion of online shopping and Internet commerce has greatly impacted state revenues generated from sales taxes. The traditional state sales tax can no longer capture the purchasing activity of state residents because states lack jurisdiction to require online, out-of-state sellers to collect and remit sales tax on remote sales. New York has led state efforts to address this issue with the passage in 2008 of a controversial vendor presumption tax law, which targets online sellers using in-state representatives to link customers to the sellers’ websites. Although states should be able to collect sales taxes on online purchases made by state residents, New York’s vendor presumption law (dubbed the “Amazon law”) violates the Commerce Clause of the United States Constitution by taxing online sellers without a physical presence in New York State. The New York Supreme Court for New York County’s recent decision to uphold the Amazon law in v. New York State Department of Taxation and Finance should therefore be reversed on appeal.

This Note argues that the New York Supreme Court for New York County incorrectly upheld New York’s vendor presumption law as constitutional, both facially and as applied to Amazon, and that states should tax online sales by implementing the Streamlined Sales Tax Project (SSTP) to provide consistency in the taxation of Internet sales. Part II provides a history of state sales and use taxes. Part III discusses the current substantial nexus and physical presence tests, and summarizes New York’s Amazon law. Part IV presents the arguments made by Amazon and New York State, and Part V analyzes the court’s decision. Part VI discusses the implications of the court’s decision, the similar Amazon laws that have been passed by other states, and the potential for state action to address the issue of taxing online sales.


Published by the
American Bar Association Section of Taxation
in Collaboration with the
Georgetown University Law Center


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