Supreme Court rules that states may require online retailers to collect sales taxes
Today's ruling upheld a statute from South Dakota, which requires any company with more than $100,000 in annual sales to collect sales tax on sales made to customers in the state.
The ruling is a victory for big chains with a presence in many states, since they usually collect sales tax on online purchases already.
The 5-4 vote overturns the 1992 Quill versus North Dakota ruling that a company needed a physical presence in the state to be taxed.
"Each year, the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States", Justice Kennedy wrote in his Court Opinion.
Large online retailers, like Amazon, tend to collect sales tax in most states, but not all.
The decision provides clarity that could lead to Congress passing legislation to create uniform national rules for collecting state taxes, to avoid a hodgepodge of individual state rules that would make the tax collection especially onerous for small e-commerce businesses.
Today's ruling caused publicly traded e-commerce companies share prices to tumble, with Shopify, Etsy, Amazon, eBay, Alibaba all recording losses in midday trading on their respective USA exchanges.
"Any state with sales taxes already has some sort of variance when it comes to exemptions and reporting rules", he said. Businesses that want to begin collecting the taxes right away, and send them to the state, can register with the department. But most of Amazon's purchases are from millions of independent merchants who post inventory on the web store, and many of those sales now aren't taxed.
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"It levels the playing field for those who invest in brick-and-mortar facilities in our communities, pay property taxes and employ our citizens", she said.
Justice Anthony M. Kennedy, who wrote the majority decision, said the previous ruling unfairly disadvantaged traditional brick-and-mortar stores.
"It's finally where it's going to be fair", said Wald. The dissenting opinion was written by Chief Justice John Roberts, joined by Stephen Breyer, Sonia Sotomayor, and Elena Kagan.
Now that Amazon's distribution network spans the country, it collects sales tax nationwide, though it doesn't collect on behalf of third-party sellers.
The ruling could be an estimated $150 million windfall for the state, notes Minnesota House Tax Chairman Greg Davids, R-Preston.
"The physical presence rule of Quill is unsound and incorrect", Kennedy wrote. The Supreme Court decision clears the way for states to unwind that competitive advantage.
Dominic Calabro, president of Florida TaxWatch, a business-oriented advocacy group, cited Florida's heavy reliance on the statewide 6 percent sales tax as a major source of operating revenue for state services.
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