Score a blow — a significant one — for state and local governments collecting sales tax from big Internet retailers, particularly Amazon.com and Overstock.com.
Score another blow for brick-and-mortar stores whose executives long have argued they are placed in an unfair competitive position when Internet sales go untaxed.
Customers are technically required to pay sales taxes anyway, but that seldom happens unless those taxes are collected by sellers at the time of purchase.
On Monday, a day ironically referred to as Cyber Monday because of its focused Internet sales marketing push as part of the holiday shopping season, the U.S. Supreme Court declined to hear the appeal of New York cases involving Amazon and Overstock.
The rebuff means the two companies must obey a New York law, upheld by the state’s highest court, requiring the two retailers to collect state and local taxes on sales in New York.
These cases have further significance because they advance previous Internet sales tax requirements.
Under a 1992 Supreme Court case, retailers can be forced to collect sales taxes in states where they have a physical presence. New York’s law raised the ante by including large companies like Amazon and Overstock that have no such physical presence but have had New York-based affiliates that earn commissions by hosting online links and soliciting sales.
Last year, Amazon settled a long-running dispute with Texas and agreed to start collecting taxes on its sales here. The company has distribution facilities in Texas.
Comptroller Susan Combs had estimated that Amazon owed $269 million for five years of uncollected sales taxes.
The National Conference of State Legislators calculated that the states collectively lost about $23 billion in sales taxes last year, based on a Commerce Department estimate of $225.5 billion in online sales in 2012.
In May, the U.S. Senate on a 69-27 vote passed a bill authorizing states to collect sales taxes on items bought from out of state over the Internet. The bill has not yet come up in the House. For the sake of tax fairness, the House should follow the Senate’s lead.