Internet sales tax ruling a win for brick-and-mortar retailers

The Supreme Court rules against Wayfair and other online retailers and overturns ban on the collection of online sales taxes. Jenny Kane  AP

The Supreme Court rules against Wayfair and other online retailers and overturns ban on the collection of online sales taxes. Jenny Kane AP

The Supreme Court overturned decades of precedent Thursday and paved the way for states to impose a broader internet sales tax.

At issue was the court's 1992 decision in Quill v.

"The Internet's prevalence and power have changed the dynamics of the national economy", Justice Anthony Kennedy wrote for the majority.

The case, which we first told you about in April, was over a South Dakota law which requires retailers, regardless of where they are, to collect and pay sales tax.

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

A Government Accountability Office audit said states missed out on about $13.7 billion in tax revenue in 2017.

"Any adjustment to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress", Roberts wrote in a dissent joined by Justices Stephen Breyer, Elena Kagan and Sonia Sotomayor. Online sellers that haven't been charging sales tax on goods shipped to every state range from jewelry website Blue Nile to pet products site Chewy.com to clothing retailer L.L. Bean. Sellers who use eBay and Etsy, which provide platforms for smaller sellers, also aren't required to collect sales tax nationwide.

The Trump administration backed South Dakota in the case, arguing that no one could have foreseen how rapidly e-commerce would expand.

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States like South Dakota that depend heavily on sales taxes for their revenue are likely to benefit most, with a predicted maximum revenue increase of around 3 percent, according to a Barclays research note.

Amazon's stock is down almost a percent since the announcement, Etsy is down 3.12 percent. "State taxes fund the police and fire departments that protect the homes containing their customers' furniture and ensure goods are safely delivered; maintain the public roads and municipal services that allow communication with and access to customers".

On June 4, the last day of the special second session, Louisiana legislators rushed through a bill that used the same wording as a South Dakota law that was the subject to the constitutional challenge in the high court.

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