Supreme Court rules on internet sales tax

Pool  Getty Images

Pool Getty Images

He added that the requirement for physical presence amounted to a "judicially created tax shelter" that put online firms at an advantage over their bricks-and-mortar competitors.

The problems with these earlier decisions, Kennedy said, were made "all the more egregious" by technological innovation. Justice Kennedy agreed with them that those cases were wrongly decided, and cited this new thing called "the Internet" as illustrative of his new reasoning. Justices Thomas and Gorsuch filed concurring opinions. In a dissenting opinion, Chief Justice John Roberts argued that any rules that affect such a large portion of the economy should be legislated by Congress, not the courts.

In dissent, Roberts passionately wrote about the plight of the economically disadvantaged shopper whose wages have stagnated and can't bear even a marginal cost increase to their core purchases. "The court should not act on this important question of current economic policy, exclusively to expiate a mistake it made over 50 years ago". That decision established that online retailers only had to collect the state sales tax in states where they had a physical presence. And it sued Wayfair, Overstock.com and Newegg, which won in lower court decisions.

"This is a great day for South Dakota". It was unclear before the court's ruling whether the new taxes would be collected. That not only could boost the state's revenue, but it will make it easier for Colorado taxpayers to be compliant with the law, Mike Hartman, executive director for the Colorado Department of Revenue, said.

"Etsy recently asked a sample group of sellers how they would respond to laws requiring the collection and remission of taxes on sales outside the sellers' home jurisdictions", the company said. That is likely to change now.

But the "Amazon tax" did give other large online retailers a choice: Start collecting sales taxes or pass that responsibility on to customers by filing reports on Colorado residents who spend more than $500 online in the course of a year and warn them they may owe state sales tax. But, if a business did not have a physical location in a state, it nearly certainly did not charge sales tax in that particular states. Unless Congress acts, that is - lawmakers have avoided enacting legislation to address the issue until this point.

The case, South Dakota v. Wayfair, Inc., Et Al. "Now our members are going to be able to figure out how to construct their businesses without worrying about whether putting a distribution center on this side of a state line or that side of the state line will result in a different tax implication".

In Thursday's 5-4 decision, South Dakota v. Wayfair, the court overturned the requirement that an online seller have a physical presence in the state. "This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both", National Retail Federation CEO Matt Shay said in a statement. But half of Amazon's sales are from third-party Marketplace sellers, who for the most part don't collect sales taxes.

OH has been known to try to collect excise taxes on cigars in the past, but most states, similar to the sales tax issue, have avoided going after consumers for missing taxes on online purchases. Now, rivals will be charging sales tax where they hadn't before. For example, South Dakota, like MA, creates a minimum threshold so only someone doing a large amount of business in the state has to collect taxes.

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