States Want to Force Online Retailers to Collect Billions in Sales Tax

NATION-NOW    
          Supreme Court closely divided on changing rules for online sales tax collection        Supreme Court divided over online sales taxes

NATION-NOW Supreme Court closely divided on changing rules for online sales tax collection Supreme Court divided over online sales taxes

That practice stems from a 1992 Supreme Court decision.

Amazon, which is not involved in the Supreme Court case, collects sales taxes on direct purchases on its site but does not collect taxes for items sold on its platform by third-party venders, constituting around half of total sales.

Under a 2016 law, South Dakota requires retailers with more than $100,000 in annual sales in the state to pay a 4.5 percent tax on purchases.

At issue in the South Dakota case is a rule stemming from two, decades-old Supreme Court cases: If a business is shipping to a state where it doesn't have an office, warehouse or other physical presence, it doesn't have to collect the state's sales tax.

"Although online businesses may not have a physical presence in some states, the Web has, in many ways, brought the average American closer to most major retailers", he wrote in suggesting the days of inconsistent sales tax collection may be numbered.

A ruling for the states would put new pressure on internet retailers and marketplaces that don't always collect taxes - including Overstock.com Inc. But small businesses that sell online say the complexity and expense of collecting taxes nationwide could drive them out of business. The company now charges consumers in every state that imposes a sales tax, but only when selling products that come from its own inventory.

That sort of discrepancy is at the heart of a multibillion-dollar U.S. Supreme Court case set for argument Tuesday. "The entire nature of interstate commerce has changed", Martz said.

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And while the issue is portrayed as one of fairness for small brick-and-mortar retailers that have to compete against online retailers, experts say those small retailers could be among the ones that get hurt.

"South Dakota's choice to forego its remedy for back taxes in the event that the Court were to overrule [existing law] will not limit the retroactive application of such a ruling with respect to other state and local jurisdictions", said Wayfair's attorneys.

It's unclear how the justices might align on the question this time.

Those fighting the change say that it would impose an undue burden on small retailers who would owe not just state sales taxes but local sales taxes that many states and counties also impose. But three justices - Neil Gorsuch, Clarence Thomas and Anthony Kennedy - have suggested a willingness to rethink those decisions.

Kennedy said in 2015 that Quill had produced a "startling revenue shortfall" in many states, as well as "unfairness" to local retailers and their customers.

But Congress also could have acted any time since 1992. "The "physical presence" rule of those eras was enunciated by the Court long before virtual presence was even imaginable", added White.

"We have waited more than 25 years for Congress to act and they haven't", White said.

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