With Billions At Stake, Supreme Court Rules States May Tax Online Retailers

"Retailers have been waiting for this day for more than two decades", said NRF's president and CEO, Matthew Shay.

The cases the court overturned said that if a business was shipping a product to a state where it didn't have a physical presence, such as a warehouse or office, the business didn't have to collect the state's sales tax.

The court decision could also be important in Florida because of the state's heavy reliance on sales-tax revenue. The Supreme Court heard arguments in the case in April.

Some retailers argued it's unreasonable to expect businesses to monitor and comply with sales tax regulations in parts of the country where they have customers, but no operations.

Brick-and-mortar stores for years have wrestled with the reality that their online competitors could effectively sell similar goods tax-free, and thus less expensively.

Quill imposes the sort of arbitrary, formalistic distinction that the Court's modern Commerce Clause precedents disavow in favor of "a sensitive, case-by-case analysis of purposes and effects".

However, on October 1, 2017, the Massachusetts Department of Revenue, under Baker and working with Attorney General Maura Healey, issued a new regulation reinterpreting existing law.

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States may force online retailers to collect potentially billions of dollars in sales taxes, the U.S. Supreme Court said in a major ruling on Thursday that undercut an advantage many e-commerce companies have enjoyed over brick-and-mortar rivals. Others, including Wayfair, Overstock, and Newegg, didn't collect sales tax, and South Dakota has sued them for failing to collect its sales taxes. The decision is seen as a blow to New Hampshire businesses, which contend that collecting a sales tax on behalf of other states is burdensome. South Dakota's law requires out-of-state sellers who do more than $100,000 in annual business in the state or more than 200 transactions with that state's residents to collect sales taxes.

Chris Geehern, a spokesman for Associated Industries of MA, a business trade group, said the court ruling has the potential to "introduce a high degree of complexity for companies that do sell things over the web".

South Dakota had challenged the physical-presence rule, saying it was losing roughly $48 to $58 million in revenue each year. All three companies sold online merchandise in the state, but did not have a physical location or employees there, and were exempted from collecting sales tax from their South Dakota customers. And, if some small businesses with only de minimis contacts seek relief from collection systems thought to be a burden, those entities may still do so under other theories. More than a dozen states have already adopted laws like that ahead of the court's decision, according to state tax policy expert Joseph Crosby. In South Dakota alone, a state with a population of less than 1 million people, The Department of Revenue estimates that the state government could take in up to $58 million annually. After the Supreme Court's decision was announced, shares in Wayfair and Overstock both fell.

The Supreme Court said the physical presence rule was "unsound and incorrect".

Trump has repeatedly made clear that he thinks online retailers should collect sales taxes.

Pressure has been building both in state legislatures and in Washington DC for over a decade to overturn the original decision and several years ago, the US' biggest online retailer Amazon chose to stop fighting it and agreed to voluntarily collect sales taxes.

(Copyright © 2015. All Rights Reserved.)
 
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