A Supreme Court Ruling Could Make Your Online Purchases More Expensive

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However, the four dissenting judges argued, it should have been Congress and not the Supreme Court that chose to flip the tables for the simple reason that the impact will be so significant.

Online shopping will become more expensive soon, as the U.S. Supreme court ruled Thursday that states can enforce internet retailers to collect sales taxes, even if they don't have a physical presence in the state, reports CNN Money. In many states, individual consumers were the ones legally responsible for paying sales tax for purchases where they were not charged, but those laws were rarely, if ever, enforced.

The Supreme Court's ruling was praised by a number of retail groups, organizations representing state and local governments, right-leaning think tanks such as the Tax Foundation and American Enterprise Institute, and a bipartisan group of lawmakers.

The current situation where billion-dollar companies don't pay state tax is actually damaging to the overall economy and states, the court's majority opinion argued.

While the court made clear that the states do not have unlimited power to require sales tax collection, "The court blessed South Dakota's law", said Carl Davis, research director for the Institute of Taxation and Economic policy. They could lower "the sales tax rate or make more significant investments in infrastructure which creates jobs", he says.

Justice Anthony M. Kennedy, who wrote Thursday's majority decision, and five of the nine SCOTUS judges all agreed that Quill was obsolete and that it unfairly disadvantaged brick-and-mortar stores.

The cases the court overturned said that if a business was shipping a product to a state where it didn't have a physical presence, such as a warehouse or office, the business didn't have to collect the state's sales tax. "You've got to have a modern sales tax, so we don't have to have any other kind of tax that people don't want", Calabro said. "Now Congress must respond by passing federal legislation to create a universal federal framework for sales and use tax collection in a way that benefits businesses regardless of the state where their business resides and avoids a patchwork of state-by-state laws". "The governor looks forward to working with members of the state legislature to decide how best to implement this change in the law in a way that is fair to the taxpayer, while respecting both brick and mortar businesses and e-retailers".

The decision overturned a 1992 ruling that concerned mail-order businesses, back when those sales totaled $180 million. Sellers who use eBay and Etsy, which provide platforms for smaller sellers, also aren't required to collect sales tax nationwide. "We have long fought the battle to defend Main Street businesses and now with today's ruling, all businesses will compete on a level playing field", said South Dakota Republican Governor Dennis Daugaard.

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"Correctly calculating and remitting sales taxes on all e-commerce sales will likely prove baffling for many retailers". That software, too, can be an added cost.

Reiterating the concerns of business groups, the dissenting opinion also argued that "the burden will fall disproportionately on small businesses".

Chief Justice John G. Roberts Jr. disagreed in his dissent.

South Dakota had challenged the physical-presence rule, saying it was losing roughly $48 to $58 million in revenue each year. The lineup of justices on each side of the case was unusual, with Roberts joining three more liberal justices and Ginsburg joining her more conservative colleagues.

The Supreme Court ruled 5-4 in favor of South Dakota.

The South Dakota law, enacted in 2016, required out-of-state online retailers to collect sales tax if they amass $100,000 in sales or 200 separate transactions. Shares in large chains with more stores traded higher.

The court's decision came in response to South Dakota v. Wayfair, a 2017 case.