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

Yuri Gripas  Reuters

In giving a victory to the states, the high court said that rule is outdated.

The United States Supreme Court ruled Thursday that states have the authority to force online shoppers to pay sales tax; a move that could generate billions of dollars and significantly raise prices of commonly bought goods.

On Thursday, the Supreme Court agreed to overturn those decisions in a 5-4 ruling.

The ruling is likely to lead other states to try to collect sales tax on purchases from out-of-state online businesses more aggressively.

One of the big advantages online retailers have had over your local shop is a lack of sales tax.

Most states would need to pass legislation before seeking to collect the additional taxes, although some have already enacted laws or regulations similar to South Dakota's.

In truth, this doesn't have much impact on Amazon, which has been collecting sales tax across the country since previous year.

The decision ends years of work by the retail industry "to reverse a pre-internet era rule that distorts free markets and puts local brick and mortar stores at a competitive disadvantage with their online-only counterparts", said Deborah White, general counsel for the Retail Industry Leaders Association.

Forty-five states rely on sales taxes for revenue, and for those states that have no income tax, sales taxes are very important. The conservative chief justice, John Roberts dissented along with liberals Stephen Breyer, Sonia Sotomayor and Elena Kagan.

But many online sellers, such as Etsy or EBay, that serve as a third party portal for thousands of small homegrown businesses that do not pay sales taxes, point to confusing tax rules that could expose them to costly audits for any revenue shortfall. Some Marketplace sellers have contracted with Amazon to collect sales taxes for them.

South Dakota was backed by President Donald Trump's administration in the case.

Other states will be doing the same thing and software and tax collection services will be gearing up. Amazon stock is down over 1.2%.

Internet companies opposed to the South Dakota law appealed.

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