New York Court of Appeals Upholds Online Retailer Nexus.

Apr 02, 2013, 17:21 ET from Ryan, LLC

DALLAS, April 2, 2013 /PRNewswire/ -- On March 28, 2013, in a consolidated opinion for the cases of, LLC v. New York State Department of Taxation and Finance and, LLC v. New York, the New York Court of Appeals ("Court") upheld a provision of New York law, under which out-of-state retailers that advertise online may be required to collect the state's sales tax.Under the challenged provision, N.Y. Tax Law § 1101(b)(8)(vi), out-of-state retailers that compensate New York residents for referring potential customers to the retailer via an online advertising link are presumed to be soliciting business in the state and required to collect New York sales tax. For this presumption to apply, a seller's New York gross receipts derived from these arrangements must have exceeded ten thousand dollars for the preceding four quarterly periods.

(Logo: and claimed that the nexus provision failed to satisfy the substantial nexus requirement of the Commerce Clause of the U.S. Constitution, under which a seller must have a physical presence in a state before it can be required to collect sales tax. The Court rejected this claim, stating that the presence of deemed sales representatives in the state would be sufficient to meet this requirement. The plaintiffs further argued that the provision violated due process by creating an irrational and effectively irrebuttable presumption of in-state solicitation. The Court observed that the New York State Department of Taxation and Finance had provided a means by which an out-of-state seller could rebut this presumption by showing 1) that its agreements with in-state online advertisers prohibited the advertisers from engaging in any solicitation activities in New York and 2) that each such advertiser certified annually that the advertiser had not engaged in any such solicitation activities. Based on this, and on its finding that the presumption created by the nexus provision was rational, the Court rejected the plaintiffs' due process challenge and upheld N.Y. Tax Law § 1101(b)(8)(vi).

About Ryan
Ryan is an award-winning global tax services firm, with the largest indirect tax practice in North America and the seventh largest corporate tax practice in the United States. Headquartered in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a three-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 1,600 professionals and associates serves over 9,000 clients in 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at


Jeremiah T. Lynch