Supreme Court to Hear Online State Sales Tax Case this Week

Gov. Phil Murphy

Gov. Phil Murphy

The Supreme Court will hear a case Tuesday on whether to tax online orders delivered to states where the business has no brick and mortar shop or warehouse.

There's been talk lately that all purchases, even from out of state retailers, should be subject to sales tax, collected by the seller.

Additionally, independent businesses on websites like Etsy and Ebay would be included in a rewritten sales tax law, as well as third party merchants that operate in Amazon's global marketplace, which totaled almost two-thirds of the company's gross merchandise volume at $313.4 billion.

This week the Supreme Court is considering a case that could end for good a precedent that allows online retailers to not charge sales tax.

A ruling favoring South Dakota could help small brick-and-mortar retailers compete with online rivals while funneling up to $18 billion into the coffers of the affected states, according to a 2017 federal report. Instead, the state argues that a sales tax should be imposed on businesses who have an "economic presence" in a state.

At the time, the court cited state sales tax laws that were too complicated for retailers to know how much to collect unless they had a physical presence in that specific state.

That practice stems from a 1992 Supreme Court decision.

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"Win or lose at the Supreme Court, we will continue to advocate for a legislative solution and a level playing field where all retailers collect and remit sales tax on the same basis", Wayfair spokeswoman Jane Carpenter said in a statement.

Whatever ruling that the Supreme Court will issue would likely affect the national e-commerce and online shopping industry.

President Donald Trump has argued Amazon doesn't collect sales taxes; even though the company does. Numerous sales on Amazon's and Walmart's sites are actually done by smaller retailers using those sites as their platform.

South Dakota sued top online retailers Wayfair, Overstock, and Newegg, for failing to comply to the said state tax law.

"Things have changed a lot since 1992".

Brian Bieron, eBay's senior director of government relations, said in an interview the 1992 precedent "provides the many small businesses that use the internet with a very clear and simple and stable legal environment in which to grow their business".

But small businesses that sell online say the complexity and expense of collecting taxes nationwide could drive them out of business.

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