Sam Zaprzalka


In 2008, New York passed a state sales tax on out-of-state e-tailers by creating a rebuttable presumption that the vendor has a taxable physical presence in New York. Amazon.com and Overstock.com challenged the statute as unconstitutional. The New York Supreme Court disagreed and granted summary judgment to the State of New York. This Comment argues that the NY Court’s dismissal was only partially correct. The court was correct in noting that applying the Statute to the plaintiffs is consistent with the Due Process Clause under current U.S. Supreme Court precedent because the plaintiffs purposefully directed their activities toward New York. However, the NY Court erred in holding that the Statute meets the dormant Commerce Clause’s “substantial nexus” requirement by imputing affiliates’ activities to the plaintiffs. While the activities of an in-state contractor or salesperson are sufficient to create a taxable nexus, traditional advertising is considered insufficient in this regard. Because the affiliates’ activities more closely resemble traditional advertising than the activities of an in-state contractor or salesperson, the Statute is in violation of the Commerce Clause. Because of this violation, the Statute is unconstitutional and should be overturned.

Part II of this Comment describes sales and use taxes, particularly their significance as a state revenue source and problems with collecting them. Additionally, Part II discusses the motivations behind taxing e-commerce. Part III explores applicable case law, including several relevant Supreme Court cases that define the parameters of the plaintiffs’ claims and a New York Court of Appeals case. Part IV introduces the statutory language and describes how the Statute has been interpreted by the agency charged with enforcing it—the New York State Department of Taxation and Finance (DTF). Part V examines the NY Court’s Amazon and Overstock decisions on both the Due Process Clause and the dormant Commerce Clause challenges. Finally, Part VI briefly discusses the Statute’s side effects, including a reduction in business for the New York affiliates.