Published: Thu, June 21, 2018
Tech | By Amelia Peters

Supreme court rules states can collect sales tax from online retailers

Supreme court rules states can collect sales tax from online retailers

The ruling stemmed from a dispute between three online retailers and the state of South Dakota, which had passed a law requiring firms that did a certain amount of business in the state to collect sales tax from customers.

The high court ruled Thursday to overturn those decisions.

The case is South Dakota v. Wayfair, 17-494. 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.

South Dakota was looking to repeal a 1992 decision which ruled that companies were only required to collect sales tax in states where they had a physical brick-and-mortar location. Customers were generally responsible for paying the sales tax to the state themselves if they weren't charged it, but most didn't realize they owed it and few paid., with its network of warehouses, also collects sales tax in every state that charges it, though third party sellers who use the site to sell goods don't have to. They said local tax laws vary widely across the nation and calculating sales taxes for 10,000 local taxing jurisdictions remains a daunting task.

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The decision ends years of work by the retail industry "to reverse a pre-internet era rule that distorts free markets and puts local brick and mortar stores at a competitive disadvantage with their online-only counterparts", said Deborah White, general counsel for the Retail Industry Leaders Association. Chief Justice John Roberts joined Stephen Breyer, Sonia Sotomayor and Elena Kagan in the dissent.

"I feel bad for the New Hampshire-based retailers because they don't have the infrastructure in place to collect sales taxes", said Nancy Kyle, president and CEO of the New Hampshire Retail Association, a 900-member organization that didn't take a position on the tax.

Chicago was one of the first areas to impose a so-called Netflix tax but other states and towns have started to tax streaming and video services. After the decision was announced, shares in Wayfair and Overstock both fell, with Wayfair down more than 3 percent and Overstock down more than 2 percent. That will open the door to more states passing laws similar to South Dakota's.

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