Supreme Court Brings Tax Law Into The 21st Century

Marcus Newton
June 22, 2018

The Supreme Court has ruled states can require online retailers to collect sales tax even if they have no physical presence in a state, a move that will affect cigar retailers.

The high court's 5-4 ruling overturns earlier decisions that said retailers couldn't be forced to collect sales taxes in states where they don't have a physical presence.

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. Quill Corporation v North Dakota decided that a company could not be charged state sales tax in a state that it did not have a physical presence.

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Last November, the federal Government Accountability Office estimated that states could have collected between $8.5 billion and $13.4 billion in sales taxes in 2017 if they had expanded taxing authority. That climbs to about $103 million in the next fiscal year.

In a post on its website Thursday, the company said it "urges Congress to step in and provide clear tax rules, with a strong small business exemption, to help small businesses take advantage of the Internet to grow and create local jobs".

Big Supreme Court win on internet sales tax - about time!

"E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule", he wrote.

The suit was brought before the Supreme Court as "South Dakota v Newegg, Wayfair, and Overstock". Amazon generally doesn't collect taxes on behalf of third-party sellers that sell goods on Amazon, but it does collect taxes on third-party sales in Pennsylvania and Washington because of new laws in those states.

Online retailers that don't charge sales taxes could sell products that are priced cheaper than those of their competitors.

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"Our states are losing massive sales tax revenues that we need for education, health care, and infrastructure", he told the court during the case.

The Small Business & Entrepreneurship Council advocacy group said in a statement, "Small businesses and internet entrepreneurs are not well served at all by this decision".

Dominic Calabro, president of Florida TaxWatch, a business-oriented advocacy group, said the ability to apply the sales tax to more internet sales will keep the state's tax structure in sync with the evolving economy.

Chief Justice Roberts argued in his dissent Congress should be the one to address the regulation of commerce between states.

The ruling puts an end to a legal regime that "distorts free markets and puts local brick-and-mortar stores at a competitive disadvantage with their online-only counterparts", said Deborah White, general counsel of the Retail Industry Leaders' Association.

Online sellers may have to change their practices around collecting online sales tax after the Supreme Court ruled in a key online sales tax case.

In anticipation of the ruling, IL lawmakers included language in budget bills passed last month to allow the state to begin collecting sales tax from a broader swath of online purchases.

You have most likely been able to avoid paying sales tax on a lot of online purchases over the years, but that's coming to an end. "You've got to have a modern sales tax, so we don't have to have any other kind of tax that people don't want", Calabro said.

Kennedy wrote that the 1992 precedent that affirmed that a physical presence is required - a case called Quill v.

Other reports by MaliBehiribAe

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