US Supreme Court to Review Bid to Collect Internet Sales Tax

Sunday, 14 Jan, 2018

The Supreme Court granted cert in South Dakota v. Wayfair, Inc. today, paving the way for a possible overturn of Quill Corp. v.

Traditional retail industry groups argue that e-commerce businesses have an unfair advantage over brick-and-mortar competitors by being able to avoid collecting sales tax. "Even if the court rules in favor of a modern sales tax policy, legislation will still be needed to spell out how that would work". The Government Accountability Office, which provides nonpartisan reports to Congress, wrote in a report past year that state and local governments would have been able to gain between $8.5 billion and $13 billion in 2017 if they could require out-of-state sellers to collect tax on sales into the state.

States are already empowered to levy fees on businesses located within their states - to the detriment of consumers, perhaps - but a decades-old Supreme Court decision generally bars them from targeting sellers without a physical presence there.

Under previous Supreme Court rulings, when internet retailers don't have a physical presence in a state, they can't be forced to collect sales tax on sales into that state.

But lawyers for South Dakota said that's no longer an issue in the digital age. And the company, which has warehouses scattered around the country, pays sales taxes in those localities. The state enacted a law requiring out-of-state retailers to collect sales tax in 2016, knowing that the move would provoke a legal battle. Other estimates are even higher.

But many states are now ignoring the Quill decision, and absent the Court's action-or legislation from Congress-this will result in a complex and indefensible patchwork of laws harming interstate commerce.

South Dakota's law was passed partly in response to a concurring opinion written by Justice Anthony Kennedy in a unanimous 2015 Supreme Court ruling that allowed a challenge to a Colorado law encouraging retailers to collect the taxes to go forward. That included Wayfair, which does not have a physical presence in the so-called Mount Rushmore state.

They urged the Supreme Court to stay out of the fight while Congress is considering what to do.

While Amazon is not affected by the suit, other online retailers including Overstock.com, home goods company Wayfair and electronics retailer Newegg, are part of the case.

The National Retail Federation, which represents both internet and brick-and-mortar sellers, said Friday it welcomed the Supreme Court's decision to take the case.

The high court will take up the ecommerce taxation case in April, with a ruling expected as early as June.

In its brief to the Supreme Court, the National Retail Federation said that software is now widely available that makes it easy for retailers to collect sales tax. "This is a basic question about fairness, which all of our members deserve whether they're selling in stores or online".