Supreme Court rules in internet sales tax case

Judy Cobb
June 21, 2018

Justice Anthony M. Kennedy wrote the majority opinion and was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel A. Alito Jr. and Neil M. Gorsuch.

Amazon has always been the "poster child" for this problem/opportunity as they have been the dominant online-only retailer for some time.

Thursday's decision in the case of South Dakota vs. Wayfair overturns a 1992 ruling which limited tax collection by retailers for online sales, regardless of the state where a shopper lives or if the company has a physical presence in that state. This ruling could help clear away any legal objections to taxes like Chicago's Netflix tax.

The high court ruled Thursday to overturn those decisions.

"Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States". Until now, online retailers with no physical presence in a state were not.

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B&H doesn't require that buyers pay sales tax if they place orders outside of NY or New Jersey, and while you're supposed to later pay those uncollected funds when tax time comes around, the vast majority of people don't. Now governments will be able to collect billions of dollars in local sales tax.

Each state has a complex sales tax system, which was cited in the 1992 Quill case as a reason against requiring businesses to collect the dues in states where they had no physical presence. Online sellers that don't charge sales tax on goods shipped to every state range from jewelry website Blue Nile to pet products site Chewy.com to clothing retailer LL Bean. Other retailers-including Etsy, eBay, and Wayfair-are also seeing huge stock dips.

South Dakota has estimated that it could take in up to $50 million a year in additional revenue with these taxes being collected.

Brick-and-mortar retailers in states are required to collect taxes on a state's behalf.

South Dakota was backed by President Donald Trump's administration in the case.

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