The Supreme Court says states can force online shoppers to pay sales tax.
The 5-4 ruling Thursday is a win for states, who said they were losing out on billions of dollars annually under a two-decades-old Supreme Court decisions that affected online sales tax collection.
The high court ruled Thursday to overturn those decisions. "The Internet's prevalence and power have changed the dynamics of the national economy," the court said in its decision in the case, South Dakota v. Wayfair.
WHY THIS MATTERS
The previous law resulted in some companies not collecting sales tax on every online purchase. 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, it didn't have to collect the state's sales tax. Customers were generally supposed to pay the tax to the state themselves if the merchant did not charge them, but the vast majority of consumers did not.
The decision has major implications for online retailers, including Amazon. (“Supreme Court Rules In Internet Sales Tax Case,” 2018)
NRF President and CEO Matthew Shay stated, “Retailers have been waiting for this day for more than two decades. The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well. This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.
“While today’s decision is a major victory, there’s still work to be done. Congress must now follow the court’s lead and pass legislation implementing uniform national rules that provide consistency and clarity for retailers across the country.”
The court this morning upheld a 2016 South Dakota law that requires online merchants with more than $100,000 in annual sales to state residents or 200 transactions with state residents to collect sales tax.
NRF argued in a friend-of-the-court brief last year that the court’s 1992 Quill Corp. v. North Dakota decision was outdated and that sales tax collection is no longer the burden it might once have been due to changes in technology. In the brief, NRF cited a wide variety of software available to automatically collect the sales tax owed, much of its available free or at low cost.
NRF and other retail groups, like Virginia Retail Federation and other state retail groups, said that lack of uniform collection is “inflicting extreme harm and unfairness” on local retailers by “distorting the retail market in favor of absentee e-commerce.”
Even with the favorable ruling, NRF believes federal legislation is still necessary to spell out details on how sales tax collection will take place rather than leaving it to each of the states to interpret the court’s decision. NRF has been a leading voice for equal sales tax rules for years, saying that Quill gave online sellers an unfair price advantage over local merchants.
Learn more here. ("NRF Says Supreme Court Sales Tax Ruling Creates ‘Fair And Level Playing Field’ Between Online And Local Retailers”, 2018)
Supreme Court Rules In Internet Sales Tax Case (2018, June 21), CBS news. Retrieved from http://cbsnews.com
NRF Says Supreme Court Sales Tax Ruling Creates ‘Fair And Level Playing Field’ Between Online And Local Retailers (2018, June 21), NRF. Retrieved from http://nrf.com