In Wayfair case, Supreme Court to let states collect Internet sales tax

Delia Walker
June 21, 2018

States could enact minimum sales thresholds for triggering the online tax collection.

The case before the Supreme Court, South Dakota v. Wayfair, stemmed from a law South Dakota passed requiring online retailers to collect and remit sales tax even if they don't have a physical presence in the state.

The win was welcomed by groups representing brick-and-mortar retailers and decried by e-commerce advocates. It's also a big change for consumers, particularly when making big ticket purchases like an expensive camera, laptop or handbag.

"There was a time when we wanted the United States, as a matter of policy, to protect nascent internet businesses by keeping down the tax burden, but that time is long gone", he said.

That's a big issue, considering that e-commerce sales in the USA were $435.5 billion previous year, vs. $180 billion in mail-order sales in 1992 when the court issued its first ruling on interstate sales and taxes.


Many large online retailers, including Amazon and Wal-Mart, already collect sales taxes because they have a large enough physical presence in each state to qualify as taxable by states.

Justice Anthony Kennedy wrote that the physical presence rule "each year. becomes further removed from economic reality and results in significant revenue losses to the states".

At issue was the Quill Corp. v. They said a decision in a case involving mail-order catalogues is obsolete in an era of e-commerce.

It ruled that the provision amounted to a "judicially created tax shelter" that put some companies at an advantage.

"As in so many other areas, technology has evolved faster than the law and left us with at times freaky, unfair results", she said. Amazon only charges tax for purchases made directly from the online shop, but independent sellers using the site are not required to do so. But half of Amazon's sales are from third-party Marketplace sellers, who for the most part don't collect sales taxes. After the decision was announced, shares in Wayfair and Overstock both fell, with Wayfair down more than 3 percent and Overstock down more than 2 percent.


"I feel bad for the New Hampshire-based retailers because they don't have the infrastructure in place to collect sales taxes", said Nancy Kyle, president and CEO of the New Hampshire Retail Association, a 900-member organization that didn't take a position on the tax.

Amazon tested that law in Texas trying to say a subsidiary was running a distribution center in Irving, but was challenged by the state of Texas when The Dallas Morning News reported the existence of the Irving facility. "Over 10,000 jurisdictions levy sales taxes".

In giving a victory to the states, the high court said that rule is outdated. Today, the retail giant collects taxes in every state that has a sales tax.

"Wayfair offers to sell a vast selection of furnishings".


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