The US Supreme Court says states can force online shoppers to pay sales tax. Big online retailers have, in many cases, managed to avoid paying sales tax when selling goods to consumers because previously, courts said that a company must have a physical presence in the state to be taxed.
Brick-and-mortar specialty outdoor retailers have been at a competitive disadvantage against internet sellers who do not always collect sales tax.
The 5-4 ruling in State of South Dakota v. Wayfair, Overstock and Newegg today is a win for states, who said they were losing out on billions of dollars annually under two decades-old Supreme Court decisions that impacted online sales tax collection.
The court overturned a longstanding rule that states can collect sales taxes only on transactions if the retailer has a "bricks and mortar" presence in that state.
Already, South Carolina expects to collect about $346 million in sales taxes from online sales in 2017-18, according to an October analysis by the state's Revenue and Fiscal Affairs Office. He believes the new ruling could bring a significant amount of revenue to the Mountain State.
Shares in the online marketplace Etsy fell more than 2% after the decision. So far, more than 250 companies have registered to collect sales taxes on MA consumers as a result, although the rule remains subject to a court challenge by Crutchfield, an out-of-state electronics retailer.
Conservative Chief Justice John G. Roberts Jr. led the dissent, joined by three Democratic-appointed justices.
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E-commerce sales in the fourth quarter of 2017 increased to $119 billion, up more than 3% from the previous quarter and almost 17% from a year earlier, according to U.S. Census Bureau data.
The Supreme Court said the physical presence rule was "unsound and incorrect".
We're likely to see this issue addressed legislatively next session.
"This will go a long way to ensure local businesses are on a level playing field with online retailers", he said. For others, it also included the added bonus of not having to pay sales tax from select merchants.
Amazon, which was not involved in the Supreme Court case, collects sales taxes on direct purchases from its site but does not typically collect taxes for merchandise sold on its platform by third-party vendors, representing about half of total sales.
Internet companies opposed to the South Dakota law appealed.
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