Clicking 'checkout' could cost more after Supreme Court case

Paying Sales Tax on Out of State Purchases

Paying Sales Tax on Out of State Purchases

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.

That practice stems from a 1992 Supreme Court decision.

But many other smaller retailers don't collect sales tax unless they have a physical presence in the state where the buyer lives, relying on a 26-year old Supreme Court decision that was related to catalog retailers. South Dakota and other state and local governments say they've been cheated out of billions of dollars because of this rule.

The counter argument is that it is very hard for retailers to maintain sales tax accounts in all states they ship to.

Chances are good you already do, even though the law requires online retailers to collect the tax only in states where they have a physical presence.

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.


A reversal could mean that all online retailers must collect sales tax everywhere. Rather, the types of businesses in question include major ecommerce-only businesses like Wayfair, Newegg (#16 on our Top 101 Consumer Electronics Retailers list), and Overstock.com-all of which are cited in South Dakota's suit.

President Donald Trump has claimed Amazon doesn't collect sales taxes, even though the company does.

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

"Things have changed a lot since 1992".

"Today's online giants do not need or deserve the special tax treatment that the Court gave mail order catalog companies a half century ago", Deborah White, General Counsel for the Retail Industry Leaders Association, said in a statement last month.

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". If they have to start complying with the complexities of collecting and remitting sales taxes nationwide, many could be forced to abandon that part of their business.

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