U.S. court backs states over web sales tax

21 June, 2018, 20:38 | Author: Lynette Payne
  • Supreme Court rules states can force online shoppers to pay sales tax

The ruling should result in a level playing field for physical retailers: Sales tax can be as high as 12% in some areas, and online businesses - for example, tech and photography retailer B&H - have advertised heavily on the fact that they don't charge sales tax on a majority of online orders.

The ruling overturned a 1992 Supreme Court precedent and potentially paves the way for consumers to pay more for their online purchases.

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

Large online retailers, like Amazon, tend to collect sales tax in most states, but not all. The state enacted a law requiring out-of-state sellers to collect and send it sales taxes, but only if they deliver more than $100,000 of goods or services into the state or make 200 or more transactions.

This overturned two Supreme Court rulings: 1967's National Bellas Hess, Inc. v. Department of Revenue of IL and 1991's Quill Corporation v.

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In the wake of the ruling, companies like Amazon will have to keep an eye on how each state handles sales tax legislation and whether they will have to collect the funds on behalf of third-party sellers. The conservative chief justice, John Roberts dissented along with liberals Stephen Breyer, Sonia Sotomayor and Elena Kagan.

South Dakota had challenged the physical-presence rule, saying it was losing roughly $48 to $58 million in revenue each year.

While this ruling is beneficial to state governments, it stands to have a negative impact on retailers and consumers alike. Trump's own online store, TrumpStore.com, only collects sales tax in two states, according to The Wall Street Journal.

After states and traditional retailers have grumbled about this situation for years, South Dakota finally made a decision to do something to change it. "This was the right case and the right time for the Court to act, and we couldn't be more pleased with the outcome". It also provides sellers access to sales tax administration software paid for by the State. After the decision was announced, shares in Wayfair and Overstock both fell, with Wayfair down more than 3 percent and Overstock down more than 2 percent.

The case is South Dakota v. Wayfair, 17-494.



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