Taxation standards have long been a point of contention between traditional stores and e-commerce venues. Generally speaking, states can collect tax revenue from brick-and-mortar sales, but not necessarily from online ones. The imbalance, states complain, translates into lost revenue that could, ultimately, benefit constituents.
But the situation may soon change, because the Supreme Court announced plans to consider a South Dakota case against several e-commerce platforms. If South Dakota wins, a new online tax precedent will be set — a decision that would fill state government coffers, but ultimately raise your online shopping prices.
CURRENT ONLINE SALES TAX LAW: STATES CAN’T TAX OUT-OF-STATE E-COMMERCE VENUES
Currently, Quill Corp. v. North Dakota is the law of the land, which bars states from collecting sales tax from businesses that do not have a nexus (physical presence) in the jurisdiction.
But the decision harkens back to 1992, and many feel the ruling must be reexamined in the “Age of Amazon.”
SOUTH DAKOTA’S ONLINE SALES TAX LEGAL QUEST
In 2016, South Dakota tried to implement an online sales tax. With the intent of triggering a legal battle that would likely wind its way to the Supreme Court, South Dakota sued several out-of-state Internet retailers (i.e., Wayfair, Overstock, and Newegg*) arguing that they owed sales tax on South Dakota sales.
In defense, the online retailers argued that collecting taxes is more expensive today than in the past, and forcing them to pay sales tax in every state would put a huge, undue financial strain on e-commerce businesses.
Overstock.com said that the company “looks forward to the opportunity to convince the Supreme Court to confirm its prior rulings protecting the free flow of interstate commerce from overreaching state tax laws.”
(*Since Amazon voluntarily remits sales taxes to states, it isn’t party to the case.)
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