Overstock.com has filed a lawsuit in New York Supreme Court, claiming that a recent New York statutory provision, which requires Internet retailers with no physical presence in the state to collect and pay sales and use tax on purchases made by New York residents, is unconstitutional. The provision presumes a retailer “solicits” business in New York if it compensates any in-state entity for directly or indirectly referring customers to the retailer. Under this statute, Overstock is presumed to “solicit”, due to its relationship with independently operated, New York-based Web sites that earn a commission by posting advertisements containing links to Overstock.com on their own sites. Overstock asserts that no solicitation actually exists and it does not have substantial nexus with the state and, therefore, seeks a declaratory judgment that the provision is invalid and unconstitutional. A similar lawsuit has been filed by Amazon.com.
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(Overstock.com, Inc. v. New York Department of Taxation and Finance, New York Supreme Court, New York County, No. 107581/08)