Supreme Court says states can require online retailers to collect sales tax

Delia Walker
June 22, 2018

South Carolina's main retail association said the state could collect an added $250 million a year in tax revenue - money from S.C. shoppers that could be used to hire school resource officers, retain teachers or fill vacancies at understaffed state agencies.

The cases the court overturned said that if a business was shipping a customer's purchase to a state where the business didn't have a physical presence such as a warehouse or office, the business didn't have to collect sales tax for the state.

The Supreme Court has ruled that states can charge online retailers sales tax, even if they don't have a physical presence in the state. That physical presence standard was just overturned by the Supreme Court in the case South Dakota v. Wayfair, by a 5-4 decision.

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. Trump's own online store,, only collects sales tax in two states, according to The Wall Street Journal.

Stocks of online retailers were down significantly immediately following the ruling.

Justice Anthony Kennedy wrote that the rule "each year. becomes further removed from economic reality and results in significant revenue losses to the states". This gave them an advantage over brick-and-mortar stores. North Dakota decision, which ruled that companies need to have at least some physical connection with a state for that state can require that company to pay taxes.

E-commerce now makes up about 10 percent of US retail sales, according to the Commerce Department. Critics of the decision said it would unduly burden and harm small businesses, which the majority acknowledged was possible. This was due to 50 years' worth of legal rulings which prevented states from charging sales tax on purchases made from out-of-state retailers. Online sales comprised more than 9% of total sales in the U.S.

In the interim, many states tried in various ways to get around Quill to collect sales taxes, with some success.

Big Supreme Court win on internet sales tax - about time!

Dominic Calabro, president of Florida TaxWatch, a business-oriented advocacy group, said the ability to apply the sales tax to more internet sales will keep the state's tax structure in sync with the evolving economy.

Internet companies opposed to the South Dakota law appealed. "Big victory for fairness and for our country".

IN lawmakers anticipated the ruling in 2017 when they passed a law that imposed sales tax on companies that did at least $100,000 worth of business or more than 200 separate transactions in the state in a year.

"This is a great day for South Dakota".

Other reports by

Discuss This Article