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SALT LAKE CITY -- Utah-based Overstock.com is hoping to send a monetary message
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to the states that charge online retailers taxes if they do any marketing there.
"States passing laws making out-of-state retailers collect sales tax simply for having marketing affiliates in those states are violating the Constitution," said the company's CEO Patrick Byrne.
Byrne says his company will simply no longer market in those states. Instead, the company will give the money it would have spent on advertising to its best customers in that state in the form of gift cards or special online membership.
The customer reward accounts will be established automatically for approximately 150,000 qualifying customers in Illinois, New York, North Carolina and Rhode Island.
Byrne believes the handful of states involved are actually violating, in particular, a Supreme Court decision in 1992: Quill v. North Dakota.
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"The Supreme Court decided that, for example, if LL Bean back in Maine is shipping duck hunting rubber boots to somebody in Texas, that they don't have to pay the Texas taxes," Byrne explained.
The court ruled businesses without a physical presence in a certain state couldn't be charged taxes by that state. Byrne said what is happening now is a blatant violation of that 1992 ruling.
"The states are pretty much blatantly transgressing that decision," Byrne said.
Over the years, the company has mounted court challenges, and has cut ties with local advertisers in all four states passing the laws.
Byrne went on to tell Utah's Morning News on KSL Newsradio states should stop looking at online retail taxes as a budget balancer.
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Story written with contributions from Becky Bruce and Jasen Lee.
