SCOTUS rules states can tax Internet sales

June 22, 2018

Shares of Amazon and other online retailers fell on June 21, after the U.S. Supreme Court ruled that individual states may require them to collect sales taxes, Business Insider reported.

The news outlet detailed that shares of the following Internet retailers were in free fall Thursday morning :

The high court’s decision in the case of South Dakota vs. Wayfair (Docket No. 17-494) overturned a 1992 ruling that limited tax collection by retailers for online sales—regardless of the state in which a shopper lives or if the company has a physical presence in that state.

The findings support a 2016 bill passed in South Dakota “to provide for the collection of sales taxes from certain remote sellers.” The legislation requires any seller “that does not have a physical presence in the state” to collect and remit sales tax if, during the previous or current calendar year:

  1. The seller’s gross revenue from the sales of tangible personal property, any products transferred electronically, or services delivered into South Dakota exceed $100,000; or
  2. The seller sold tangible personal property, any product transferred electronically, or services for delivery into South Dakota in 200 or more separate transactions.

Only five states do not have a statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, Alaska and Montana allow individual individual cities to collect local sales taxes, according to the Tax Foundation.

Wayfair had argued in its brief that, if the 1992 ruling were overturned, “the burdens will fall primarily on small- and medium-size [online] companies whose access to a national market will be stifled.”

However, Business Insider reports, the ruling is widely seen as a victory for another part of the retail sector: brick-and-mortar stores, which previously said that online retailers’ ability to skirt sales tax collection gave them an advantage.

States also had argued against the previous statute, saying that it reduced their potential revenue from sales taxes as more consumers turn to digital shopping options.

What’s more, President Donald Trump had criticized Amazon, whose founder Jeff Bezos also owns The Washington Post, claiming that it does not collect any sales tax. The company maintains that it has been collecting tax in all 45 states that require it.

Wayfair, itself commented on the decision on June 21, saying “We welcome the additional clarity provided by the Court’s decision today. 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. As a result, we do not expect today’s decision to have any noticeable impact on our business, as it may on other retailers who do not currently collect and remit sales tax.

“Wayfair has long supported a legislative solution that would establish a level playing field for brick-and-mortar and online retailers by permitting states to collect sales tax on online sales. While we believe the Court was not the ideal venue for creating this level playing field, we expect that today’s decision will bring clarity and certainty to this issue.”

Research contact: @g_rapier 

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