USA court backs states over web sales tax

Isaac Cain
June 21, 2018

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Indeed, Justice Gorsuch once called the current system "a judicially created tax shelter".

Supreme Court Justice Anthony M. Kennedy agreed in the majority opinion, finding that 25-year-old rule "prevented market participants from competing on an even playing field".

It passed a law requiring retailers with more than $100,000 in annual sales or 200 transactions in the state to pay a 4.5 percent tax.

In response to the ruling, the stocks of several internet retailers, including Amazon, eBay and Wayfair, all dropped.

Numerous largest online retailers, such as Amazon, already pay sales taxes because they have enough of a physical presence in most states through their network of warehouses and distribution facilities to qualify as taxable by states. North Dakota, in 1992, when e-commerce made up a much less substantial portion of retail sales.

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Small online businesses will be the hardest hit, said Chris Cox, a lawyer for e-commerce industry group NetChoice. Brick-and-mortar retailers have argued that online retailers have an unfair advantage. It also likely will lead to many consumers paying more at the online checkout.

South Dakota has estimated that it could take in up to $50 million a year in additional revenue with these taxes being collected.

Amazon, by far the nation's largest online seller, is not a party to the case, since it now has a physical presence in many states, with warehouses, and pays the taxes.

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

In the digital era, the costs of complying with different tax regimes "are largely unrelated to whether a company happens to have a physical presence in a state", Kennedy wrote. Louisiana is beefing up its efforts to collect taxes on purchases made from out-of-state in...

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