Online Purchase Sales Tax Fight Heads to SCOTUS

Online Purchase Sales Tax Fight Heads to SCOTUS

As Dealerscope reported earlier this year, the Supreme Court announced it would review a 25-year-old case that has the potential to dramatically alter ecommerce here in the United States.

Based on a prevailing Supreme Court law, retailers can be forced to collect taxes only in states where the company has physical presence.

Initially meant to regulate catalog-based sellers, the ruling has been challenged again and again by states seeking to claim their fair shake of online sales.

Is such a law, somewhat unknown, nearly (or perhaps completely) unenforced, and overwhelmingly ignored, included in "dina d'malchusa dina"? North Dakota, which says retailers only have to collect sales tax in states where they have a physical presence.

The Supreme Court is hearing a case this week that could affect how much customers pay for online purchases.

Times and technology have changed.

But e-commerce retailers argue that collecting sales taxes in all 50 states would present complex issues for corporations, requiring them to keep track of 12,000-plus tax jurisdictions within thousands of counties, cities, and even airports that have their own tax requirements.

But numerous sales these small retailers get are through bigger sites like Amazon and Walmart.

South Dakota depends more than most states on sales taxes because it is one of nine that do not have a state income tax.

Online retailers said reversing the 1992 precedent is a negative move in terms of e-commerce.

"The current tax system favors online retailers over brick-and-mortar businesses, and undermines fair and open competition in the marketplace", the National Retail Federation argues in a brief it filed in the case. "The "physical presence" rule of those eras was enunciated by the Court long before virtual presence was even imaginable", added White.

Instead, online companies-including Amazon and Overstock-said they support a nationwide law that addresses internet sales taxes that would relieve retailers from dealing with a patchwork of state measures. Amazon collects sales tax on its own products, but not on other businesses' products that are sold through its website. However, GAO also estimated that untaxed online sales would make up just 2 to 4 percent of state and local sales tax revenue.