Published: Sat, June 23, 2018
Electronics | By Shannon Stone

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

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

The United States Supreme Court ruled Thursday that states may now require online retailers to collect state sales taxes.

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. Consumers were supposed to voluntarily pay sales taxes on remote purchases, although it rarely happened.

"The Internet's prevalence and power have changed the dynamics of the national economy", wrote Justice Anthony Kennedy in the majority opinion. North Dakota, which forbade states from interfering with interstate commerce by taxing companies that don't have a physical presence within their boundaries. The burden fell on the consumer to report their online purchases when filing taxes.

"Quill creates rather than resolves market distortions", the ruling says. He argued, "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". Last month, Trump's business quietly updated the list of states to include NY, while Virginia was added not long before that.

This has long given major online retailers an advantage over local brick-and-mortar stores, as customers increasingly turned to the Internet to avoid higher prices, having to travel to a physical store, and sales tax.

In a ruling that could benefit Nebraska's tax coffers, the Supreme Court says states can force online shoppers to pay sales tax. Online sellers that haven't been charging sales tax on goods shipped to every state range from jewelry website Blue Nile to pet products site Chewy.com to clothing retailer L.L. Bean.

"What internet sales have done to real estate values, commercial value, shopping centers - seeing their main tenants leave - it has had a real negative impact on local communities", Yarmuth said. "So, by relying on a sales tax, you have to make sure it's modern and up to date". "A lot of the companies that haven't been paying sales tax are going to have to start paying".

A Government Accountability Office audit said states missed out on about $13.7 billion in tax revenue in 2017.

First, the court did not rule out the possibility that states may not collect taxes on all online purchases, given the negligible size of some transactions.

The ruling could be an estimated $150 million windfall for the state, notes Minnesota House Tax Chairman Greg Davids, R-Preston.

The Legislature passed a series of laws to try to capture some of that money, including a provision in last year's tax compromise bill. South Dakota took that as a prompt to change its state laws, demanding that retailers - whether online or with a physical presence - must collect taxes on their sales to state residents. A bipartisan group of senators filed a brief in the case supporting South Dakota's effort to overturn the online sales tax ban, essentially acknowledging that the legislative body was too dysfunctional to fix the problem.

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