Hi-Tech

Supreme Court to Hear Online State Sales Tax Case this Week

Supreme Court to Hear Online State Sales Tax Case this Week

A high-stakes showdown at the U.S. Supreme Court on Tuesday will determine whether states can force out-of-state online retailers to collect sales taxes in a fight between South Dakota and e-commerce businesses. Online retailers Wayfair, Overstock.com and Newegg are among those opposing South Dakota's attempt to charge online sales taxes. South Dakota and other state and local governments say they've been cheated out of billions of dollars because of this rule.

Amazon and Walmart, two of the giants of online retailing, collect sales tax on all their sales in the 45 states that have a statewide sales tax.

A ruling favouring South Dakota could help small brick-and-mortar retailers compete with online rivals while funnelling up to $18 billion into the coffers of the affected states, according to a 2017 federal report.

Many smaller retailers don't; unless they have a physical presence in the state where the buyer lives.

South Dakota is asking the nine justices to overturn a 1992 Supreme Court precedent that states can not require retailers to collect state sales taxes on purchases unless the businesses have a "physical presence" in the state.

The justices will hear arguments in the case on Tuesday against a backdrop of Trump's harsh criticism of Amazon.com Inc, the dominant player in online retail, on the issue of taxes and other matters.

Numerous sales on Amazon's and Walmart's sites are actually done by smaller retailers using those sites as their platform.




States generally require consumers who weren't charged sales tax on a purchase to pay it themselves, often through self-reporting on their income tax returns.

Retailers fighting the states say they would be hit with heavy costs of complying with rules for thousands of products in thousands of cities, counties and even airports that serve as their own taxing jurisdictions.

States would capture more of that tax if out-of-state sellers had to collect it, and states say software has made sales tax collection simple.

Major retailers that have brick-and-mortar stores, and therefore already collect taxes, are represented by industry groups that back South Dakota.

"For small businesses on tight margins, these costs are going to be fatal in many cases", said Andy Pincus, who filed a brief on behalf of eBay and small businesses that use its platform.

Under a 2016 law, South Dakota requires retailers with more than $100,000 in annual sales in the state to pay a 4.5 percent tax on purchases. At the time, the court was concerned in part about the burden collecting sales tax would place on the catalog company. In addition, they said, the court can write a ruling that "applies prospectively only for all retailers and taxpayers". "The "physical presence" rule of those eras was enunciated by the Court long before virtual presence was even imaginable", added White. "A connection to a shopper's favorite store is a click away regardless of how close or far the nearest storefront".