Supreme Court rules in internet sales tax case

Yuri Gripas  Reuters

Yuri Gripas Reuters

The Supreme Court justices ruled 5-4 that states could collect sales tax from internet sales.

The U.S. Supreme Court today handed down its anticipated decision in South Dakota v. Wayfair.

"The internet's prevalence and power have changed the dynamics of the national economy", Justice Kennedy wrote. All three companies sold online merchandise in the state, but did not have a physical location or employees there, and were exempted from collecting sales tax from their South Dakota customers. It passed a law requiring online retailers with $100,000 in sales of goods or with more than 200 transactions to collect and remit a sales tax.

But Wayfair, an online furniture shop, and other retailers argued that handling the nuanced sales tax rules in each state would be impossible for small online retailers and would put them out of business. Amazon.com, with its network of warehouses, also collects sales tax in every state that charges it, though third party sellers who use the site to sell goods don't have to. States could enact minimum sales thresholds for triggering the online tax collection.

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Forty-five states rely on sales taxes for revenue, and for those states that have no income tax, sales taxes are very important. Chief Justice John Roberts wrote a dissenting opinion. Most other major online retailers have followed suit, simply because it's become cheaper for them to collect the tax and majority have a "physical presence" in much of the country anyway, as fulfillment centers are popping up everywhere. Although technically consumers are required to pay sales tax on all purchases, it is practically impossible to collect without the retailer applying it at the point of sale. Amazon stock is down over 1.2%. "This Court should not prevent States from collecting lawful taxes through a physical presence rule that can be satisfied only if there is an employee or a building in the State".

Taxes on TV services is not new.

The Trump administration had encouraged the Supreme Court to overturn the previous rulings and allow South Dakota to collect the sales tax.

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