Supreme Court says states can force online shoppers to pay sales tax

Sheri Evans
June 21, 2018

U.S. Supreme Court is seen in Washington, U.S. April 24, 2018.

More than 40 states and the Trump administration asked the Supreme Court to overturn its 1992 decision in Quill v.

Thursday's ruling involves a dispute between the state of South Dakota and Boston-based Wayfair Inc., along with other two other online sellers, Overstock.com Inc. and Newegg Inc. Amazon stock is down over 1.2%. Recently that has been expanding with States pushing to get sales taxes on sales even when the company does not have a physical presence in that area.

And, in 2015, Justice Kennedy suggested he was prepared to overrule the Supreme Court's 1967 and 1992 decisions in light of modern realities.

E-commerce now makes up about 10 percent of USA retail sales, according to the Commerce Department.

During an interview with FOX Business in April, National Economic Council Director Larry Kudlow said changing the law could level the playing field between traditional and e-commerce retailers.

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That will open the door to more states passing laws similar to South Dakota's. It also likely will lead to many consumers paying more at the online checkout.

Forty-five states rely on sales taxes for revenue, and for those states that have no income tax, sales taxes are very important.

Amazon, by far the nation's largest online seller, is not a party to the case, since it now has a physical presence in many states, with warehouses, and pays the taxes.

South Dakota has estimated that it could take in up to $50 million a year in additional revenue with these taxes being collected. However, Alaska and Montana allow individual individual cities to collect local sales taxes, according to the Tax Foundation.

In the digital era, the costs of complying with different tax regimes "are largely unrelated to whether a company happens to have a physical presence in a state", Kennedy wrote.

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