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Supreme Court declines to hear sales tax case

The U.S. Supreme Court on Monday declined to tackle the long-standing question of whether Internet retailers like should be required to collect sales taxes in states where they have no physical presence.

In a case brought by Amazon and, the court was asked to decide whether a New York state law that requires online retailers to collect taxes is valid under the Constitution. Because the court declined to hear the case, the retailers' challenge to that law has failed. 

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.

In a March ruling, the New York 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.

Seattle-based Amazon has been fighting one-on-one battles with the 50 states for years over sales tax.

The government has no national sales tax and Congress has not moved ahead with proposed legislation that would give all states the power to enforce their sales tax laws on Internet retailers. For years, Congress has debated legislation to grant states the power to tax online purchases. In May, the Senate approved a bill, but it has stalled in the House of Representatives.

Amazon supports federal legislation for nationwide state sales tax enforcement, but other online retailers, including eBay and Overstock, have fought it.

Under a 1992 Supreme Court decision, retailers without a physical presence in a state do not need to collect and remit taxes in that state on each sale. Consumers are supposed to pay the tax on their own, but few do.

In states where Amazon has no physical presence, the company does not generally collect the tax, giving it a pricing edge over traditional brick-and-mortar merchants.