Supreme Court lets states charge internet retailers more in taxes

The Supreme Court rules against Wayfair and other online retailers and overturns ban on the collection of online sales taxes. Jenny Kane  AP

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

The ruling opens the door to a new revenue stream to fill state coffers - up to $13 billion annually, according to a federal report - while imperiling a competitive advantage that e-commerce companies had over brick-and-mortar rivals that already must collect sales tax.

In response to the ruling, the stocks of several internet retailers, including Amazon, eBay and Wayfair, all dropped. Amazon shares were trading down slightly after the news.

"In light of internet retailers' pervasive and continuous virtual presence in the states where their websites are accessible, the states have ample authority to require those retailers to collect state sales taxes owed by their customers", U.S. Solicitor General Noel Francisco said in a friend-of-the-court brief. The state conceded in court, however, that it could only win by persuading the Supreme Court to do away with its physical presence rule.

E-commerce now makes up about 10 percent of US retail sales, according to the Commerce Department. They said a decision in a case involving mail-order catalogues is obsolete in an era of e-commerce.

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The Trump administration had urged the justices to side with South Dakota. The law could yet face legal challenges on other grounds, Kennedy noted. 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.

That said, South Dakota's tax system includes several features that appear created to prevent discrimination against or undue burdens upon interstate commerce. They said local tax laws vary widely across the nation and calculating sales taxes for 10,000 local taxing jurisdictions remains a daunting task. First, the Act applies a safe harbor to those who transact only limited business in South Dakota.

Kennedy wrote that the 1992 precedent that affirmed that a physical presence is required - a case called Quill v.



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