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Snippets: Online Sales Tax Cert. Denial, Frequent Flyer Arguments

By William Peacock, Esq. on December 04, 2013 | Last updated on March 21, 2019

It's been a busy early week on First Street, with the Court denying a case that affects anyone who purchases anything on the Internet, and with oral arguments in a frequent flyer dispute.

There were also a pair of decisions handed down by the Court in less exciting matters, namely taxation of partnerships and forum selection clauses in contract.

We're going to play a hunch here and guess that the vast majority of you are more interested in whether you'll pay tax on that online purchase, or whether you can get booted from a frequent flyer program without compensation (and with thousands of miles in your account) and we'll get back to the Court's less exciting opinions later this week.

SCOTUS Won't Address Internet Sales Tax (Yet)

Anyone who has ever shopped online knows that the sales tax situation is a complete and utter mess. For example, if I purchase a guitar from either the local Guitar Center, or its online site, as a Californian, I pay tax. But, if I purchase the same item from a New York-based company, such as, I don't. Yep. B&H Photo? Nope.

Of course, shoppers are supposed to pay use tax, even if sales tax isn't collected by the merchant, but nobody really tracks and pays that, do they?

In any case, New York was fed up with the discrepancy, so they passed the so-called "Amazon tax," which as our Free Enterprise blog so clearly explains, only applies to businesses that make more than $10,000 in sales to New York residents.

Then again, can a state tax a company with no physical presence (or "nexus") in that state? Not so much, if the Supreme Court's decision in Quill v. North Dakota (where the court devised the "nexus" test) means anything.

Apparently, it doesn't mean much, as the Supreme Court declined to review the New York state court's opinion, which seems to conflict with the SCOTUS case. Reuters notes that a similar battle, in Illinois, went the other way and could also be seeking cert. in the near future.

Frequent Fliers (and Whiners)

Northwest Airlines kicked a rabbi out of its frequent flyer program, allegedly because he abused the program (both verbally, by complaining about two dozen times in seven months) and by allegedly intentionally booking seats on overbooked flights to get compensation.

The question is: does he have a remedy?

The Airline Deregulation Act of 1978 made airlines immune from suits brought under state law, which may leave him legally stranded. In 1995, the Court used that law to ground a lawsuit regarding American Airlines' frequent flyer program, though the language of the opinion left room for lawsuits regarding broken contractual promises.

Of course, that result isn't exactly fair, is it? The Ninth Circuit reinstated the suit, allowing him to sue under the general duty to act in "good faith" and "fair dealing."

According to the Los Angeles Times, during oral arguments, the Supreme Court justices seemed to be siding with the airline, though Justice Kagan did express concern over whether this was a breached contract rather than a loyalty program that would be covered by the 1995 case.

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