Supreme Court to Hear Online State Sales Tax Case this Week

Supreme Court to Hear Online State Sales Tax Case this Week

At issue in the South Dakota case is a rule stemming from two, decades-old Supreme Court cases: If a business is shipping to a state where it doesn't have an office, warehouse or other physical presence, it doesn't have to collect the state's sales tax.

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.

Many smaller retailers don't; unless they have a physical presence in the state where the buyer lives. Amazon collects sales tax on its own products, but not on other businesses' products that are sold through its website.

Led by South Dakota, the states ask the court to overturn its 1992 decision in Quill v. Walmart also collects sales tax on all online purchases. It's an issue that brick-and-mortar retailers insist will provide a level playing field with online competitors, and help to provide state and local governments with the tax revenue they deserve.

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

Hodge said numerous Chamber members have expressed concern that online retailers that do not charge local sales taxes have an unfair advantage.

Bruce Jones, a professor of economics at Georgia Highlands College, said the latest figure he's seen puts online sales at between 9 and 10 percent of all retail sales across the nation. "The data we have show that most people don't actually pay attention to the amount of sales tax that is being collected".

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Those fighting the change say that it would impose an undue burden on small retailers who would owe not just state sales taxes but local sales taxes that many states and counties also impose. But small businesses that sell online say the complexity and expense of collecting taxes nationwide could drive them out of business.

No wonder Washington, D.C., lawyer Andrew Pincus, representing eBay, said one of the toughest preconceptions that online retailers must overcome is "that this case is sort of a done deal". It sued three large online retailers - Wayfair, Overstock and Newegg - for not complying. But it's practically impossible for the state to get the tax revenue unless the company collects the money at the time of sale.

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.

Whichever direction the court opts to go, and a decision is expected by the end of June, there is no question the ruling will have an impact all over the country.

"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. Kennedy has written that the 1992 case was "questionable even when decided" and "now harms states to a degree far greater than could have been anticipated earlier".

But other online sellers, from 1-800 Contacts to home goods site Wayfair, can often sidestep charging the tax. "If we had to start charging sales tax, it would put us out of the market".

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