Supreme Court allows states to collect sales taxes on more online transactions


A U.S. Supreme Court ruling that paves the way for states to collect more sales taxes from online purchases has upended shaky tax negotiations among lawmakers in the Louisiana House.

The Supreme Court on Thursday allowed states to make online retailers collect sales tax, siding against e-commerce companies like Wayfair Inc (W.N) and Inc (OSTK.O) in their high-profile fight with South Dakota.

The ruling is a victory for South Dakota, where the law requires retailers with more than $100,000 in sales or 200 transactions annually in the state to pay a 4.5 percent tax on purchases. Justice Roberts penned the dissenting opinion and was joined by three other justices: Breyer, Sotomayor and Kagan.

Justices Clarence Thomas, Neil Gorsuch, Ruth Bader Ginsburg and Samuel Alito joined Kennedy in a majority that cut across ideological lines. But when it comes to exactly how much of an impact the Supreme Court's ruling would carry, the department says it's too soon to tell.

The chief executive of a medium-sized sporting goods company based in San Diego, who did not wish to be identified to avoid making his company a target for state tax collectors, said it was unreasonable to expect small and medium sized businesses to deal with thousands of jurisdictions. Market shares for Wayfare and Esty have dropped since the announcement of the ruling.

"South Dakota's tax system includes several features that appear created to prevent discrimination against or undue burdens upon interstate commerce", Kennedy wrote.

But e-commerce trade group Netchoice called the ruling a "blow to consumers and small online businesses", according to a statement emailed to Retail Dive. Then in 2000, a national commission urged states to simplify their tax systems as a precursor to taxing remote sellers. Small businesses may have to figure out how to comply with various state sales tax laws, though there are software options to help. "Illinois categorizes Twix and Snickers bars, chocolate confections usually displayed side-by-side in the candy aisle, as food and candy, respectively".

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"One vitalizing effect of the Internet has been connecting small, even "micro" businesses to potential buyers across the nation", he wrote.

The South Dakota measure was opposed by Wayfair, Overstock and Newegg.

Congress could still intervene.

And one of the biggest winners from that ruling, maybe ironically, could be Amazon, said Tom Forte, managing director at research firm D.A. Davidson.

NRF argued in a friend-of-the-court brief a year ago that the court's 1992 Quill Corp. v.

"Each year, the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States", Kennedy wrote.

Despite some reports, however, this is not about imposing new taxes - but rather about closing an unfair tax loophole that has cost state and local governments billions in lost revenue each year. More than 20 states define a seller's physical presence as including any affiliated website.