Supreme Court Rules for States in Online Sales Tax Case

Alonzo Simpson
June 21, 2018

U.S. Supreme Court is seen in Washington, U.S. April 24, 2018.

The ruling opens the door to a new revenue stream to fill state coffers - up to $13 billion annually, according to a federal report - while imperiling a competitive advantage that e-commerce companies had over brick-and-mortar rivals that already must collect sales tax.

In giving a victory to the states, the high court said that rule is outdated.

B&H doesn't require that buyers pay sales tax if they place orders outside of NY or New Jersey, and while you're supposed to later pay those uncollected funds when tax time comes around, the vast majority of people don't. Inc shares fell as much as 1.9 percent before paring losses.

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E-commerce now makes up about 10 percent of US retail sales, according to the Commerce Department. The case challenges South Dakota's application of its sales tax to internet retailers who sell into South Dakota but have no property or employees in the state.

During an interview with FOX Business in April, National Economic Council Director Larry Kudlow said changing the law could level the playing field between traditional and e-commerce retailers.

South Dakota is leading the legal charge, passing a law requiring the collection of sales tax on Internet vendors with at least 200 yearly transactions or $100,000 in sales to its residents. It also likely will lead to many consumers paying more at the online checkout. South Dakota's governor has said his state loses out on an estimated $50m a year in sales tax that doesn't get collected by out-of-state sellers. North Dakota - was "flawed on its own terms" and was especially problematic due to the rise of internet retail. Now governments will be able to collect billions of dollars in local sales tax.

The idea of online taxes for a long time was limited to companies who had a physical presence in that state.

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