Supreme Court rules that internet sales can be taxed by states

Supreme Court rules that internet sales can be taxed by states

Somewhere along the line, Amazon got so big that it now has what could be called a "physical presence" (in the form of fulfillment centers) in almost every state, and so it made a decision to start charging sales tax in every state that levied one. "This is a big win for local brick-and-mortar retailers, who will now get a chance to compete on a level playing field with out-of-state internet companies that have maintained an unfair edge by not collecting sales taxes". "Small web businesses will be hardest hit, particularly those with only a single location, because they can't afford the overhead to comply with thousands of different tax rules across the country", said Chris Cox, outside counsel for e-commerce trade association NetChoice, in a statement. He said the legislation would be tailored to fit within the Supreme Court ruling. In his majority opinion, Justice Kennedy said it was "inconsistent" for the Supreme Court to ask Congress to "address a false constitutional premise of this Court's own creation". But, if a business did not have a physical location in a state, it nearly certainly did not charge sales tax in that particular states.

The decision was immediately celebrated by state and local governments and brick-and-mortar retailers.

The original decision had the unintended but incredibly beneficial impact of boosting e-commerce in the early days of the internet.

However, on October 1, 2017, the Massachusetts Department of Revenue, under Baker and working with Attorney General Maura Healey, issued a new regulation reinterpreting existing law.

The Court's decision was 5 to 4.

The court, in a ruling authored by Justice Anthony Kennedy, revived a 2016 South Dakota law that required larger out-of-state e-commerce companies to collect sales tax, a mandate that the online retailers fought in court. That was due to an outdated Supreme Court decision on sales tax collection. Kennedy said that position was archaic, "unsound and incorrect" in the internet age.

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"Ecommerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule". But the administrative costs of compliance, especially in the modern economy with its Internet technology, are largely unrelated to whether a company happens to have a physical presence in a State. If a business had a physical presence in a state, then they could be forced to collect sales tax at the time of purchase. And, if some small businesses with only de minimis contacts seek relief from collection systems thought to be a burden, those entities may still do so under other theories.

The decision will also have dramatic consequences for small online retailers that do business in many states.

Thursday's victory for South Dakota would seem to flip the script, with states less interested in enacting some sort of national legislation, and online vendors perhaps more interested.

Stock prices for major online retailers fell after the decision was announced. While the Supreme Court spoke approvingly of the law, it sent it back to South Dakota's highest court to be revisited in light of the court's decision.

"Wayfair already collects and remits sales tax on approximately 80% of our orders in the United States, a number that continues to grow as we expand our logistics footprint".

Large retailers including Apple, Macy's, Target and Walmart, which have brick-and-mortar stores nationwide, generally collect sales tax from their customers who buy online.

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