Supreme Court rules states can force online retailers to collect sales tax

21 June, 2018, 19:56 | Author: Julian Harrison

The 5-4 ruling Thursday is a win for states, who said they were losing out on billions of dollars annually under two decades-old supreme court decisions that impacted online sales tax collection.

The Supreme Court on Thursday reversed course on a ruling that dates to the mail-order catalogue era known as Quill that limited states to collect sales taxes only from retailers that have a physical presence, or "nexus", in a particular state to require that company to collect sales taxes from its customers.

At issue was the court's 1992 decision in Quill v.

It passed a law requiring retailers with more than $100,000 in annual sales or 200 transactions in the state to pay a 4.5 percent tax.

Customers were generally supposed to pay the tax to the state themselves if they don't get charged it, but the vast majority didn't.

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

It ruled that the provision amounted to a "judicially created tax shelter" that put some companies at an advantage.




"Any adjustment to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress", Roberts wrote in a dissent joined by Justices Stephen Breyer, Elena Kagan and Sonia Sotomayor.

Andrew Moylan, executive vice president of the National Taxpayers Union Foundation, said the Court dealt a blow to taxpayers and is allowing states the power to tax businesses all over the country.

Wayfair (W), Etsy (ETSY) and eBay (EBAY) all dipped in early trading Thursday immediately following the ruling.

Amazon's stock is down almost a percent since the announcement, Etsy is down 3.12 percent.

The Trump administration backed South Dakota in the case, arguing that no one could have foreseen how rapidly e-commerce would expand.

"There was a time when we wanted the United States, as a matter of policy, to protect nascent internet businesses by keeping down the tax burden, but that time is long gone", he said.

South Dakota specifically brought this lawsuit against Wayfair, Overstock.com, and Newegg.

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