With Billions At Stake, Supreme Court Rules States May Tax Online Retailers

Yolanda Curtis
June 21, 2018

Thursday's ruling involves a dispute between the state of South Dakota and Boston-based Wayfair Inc., along with other two other online sellers, Overstock.com Inc. and Newegg Inc.

"In light of internet retailers' pervasive and continuous virtual presence in the states where their websites are accessible, the states have ample authority to require those retailers to collect state sales taxes owed by their customers", U.S. Solicitor General Noel Francisco said in a friend-of-the-court brief.

E-commerce now makes up about 10 percent of USA retail sales, according to the Commerce Department.

That will open the door to more states passing laws similar to South Dakota's. The law could yet face legal challenges on other grounds, Kennedy noted.


The bill, which was signed into law by Gov. John Bel Edwards, positions Louisiana to take advantage of the ruling and start requiring internet retailers to collect sales taxes.

Only five states do not have a state-wide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.

Not only does allowing states to collect these new taxes on consumers have the potential to raise online prices, it could also harm some businesses.

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 states that are likely to see the biggest percentage increase in revenue are Louisiana, Tennessee, South Dakota, Oklahoma and Alabama, according to the Barclays research.

In the digital era, the costs of complying with different tax regimes "are largely unrelated to whether a company happens to have a physical presence in a state", Kennedy wrote.

The 5-4 ruling strikes down a decades-old decision that impacted online sales; clearing the path for local governments to charge sales tax on goods regardless of whether or not the business has a "physical" footprint within its boundaries.


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