Tech

Supreme court rules states can collect sales tax from online retailers

Supreme court rules states can collect sales tax from online retailers

Shares of Amazon and other online retailers fell Thursday morning after the Supreme Court ruled that individual states can require tax collection on digital sales.

The supreme court ruled on Thursday that states can require online retailers to collect sales tax from customers, overturning an pre-internet ruling that had allowed many internet businesses to avoid paying the duties.

South Dakota wanted out-of-state retailers to begin collecting the tax and sued several of them: Overstock.com, electronics retailer Newegg and home goods company Wayfair. North Dakota, in 1992, when e-commerce made up a much less substantial portion of retail sales.

The Trump administration backed South Dakota in the case, arguing that the high court could not have expected how rapidly e-commerce would expand when it made the 1992 ruling.

South Dakota concluded in 2016 that the explosion in online sales changed the market dramatically.

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Yet a majority of the states say they are losing billions in revenue, and they are supported by many large, so-called brick-and-mortar retailers like Wal-Mart that do pay sales tax, regardless of whether their sales are done in stores or online.

The 5-4 decision is expected to help states collect billions more in sales tax each year. Forty-five of the 50 states impose sales taxes.

"When the day-to-day functions of marketing and distribution in the modern economy are considered, it is all the more evident that the physical presence rule is artificial in its entirety", Justice Anthony Kennedy wrote.

After states and traditional retailers have grumbled about this situation for years, South Dakota finally made a decision to do something to change it. The law required out-of-state sellers who do more than $100,000 of business in the state or more than 200 transactions annually with state residents to collect sales tax and turn it over to the state.


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