US Supreme Court ends internet's escape from state sales tax

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Levine/NewscomToday the Supreme Court overturned past decisions and ruled, 5-4, that states may potentially demand that businesses that don't have actual physical presence within their borders still pay sales taxes on what they sell to residents who live there. Big online retailers have, in many cases, managed to avoid paying sales tax when selling goods to consumers because previously, courts said that a company must have a physical presence in the state to be taxed. South Dakota had passed a bill in 2016 that said online retailers must collect sales tax if they make more than $100,000 worth of sales in their state, or do 200 transactions in their state.

Many retailers, such as Amazon, Apple, Walmart, and Target, were already collecting sales taxes even if they didn't have a brick-and-mortar retail space in a state.

For the full story, head on over to CNN Money. Mail-order sales in 1992 were only $180 billion, while online sales a year ago topped $450 billion. "Today is just the beginning", says South Dakota state Sen. The ruling "is a nightmare for American businesses and small online sellers, who will now have to comply with the different tax rates and rules" of each jurisdiction, said a statement by US Reps.

But Gehern noted that the court did put some limits on what states can do, because they are not allowed to put "undue burdens" on interstate commerce. North Dakota, that involved mail-order catalogs.

South Dakota had challenged the physical-presence rule, saying it was losing roughly $48 to $58 million in revenue each year.

South Dakota Gov. Dennis Daugaard called Thursday's decision a "Great Day for South Dakota", though the high court stopped short of greenlighting the state's law. The state also provides sales tax collection software for free for any business that wants it, and using that software immunizes the business from audit liability.

Amazon (AMZN, -1.1%) - which already collects tax on all its direct sales but not sales by independent merchants through its site - declined to comment.

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"I feel bad for the New Hampshire-based retailers because they don't have the infrastructure in place to collect sales taxes", said Nancy Kyle, president and CEO of the New Hampshire Retail Association, a 900-member organization that didn't take a position on the tax.

Kennedy also wrote that the concerns of small retailers, who do minimal online sales, could be dealt with by Congress or by a further court case.

Retailers with physical storefronts celebrated the decision, as did the National Retail Federation, a trade group comprised of some of the biggest brick-and-mortar retailers in the US.

Today's ruling overturns a decision from the Court in 1992 that paved the way for the explosion of online retail in the United States.

Earlier this year, Iowa legislators approved expanding sales tax to digital goods like e-books, subscription services like Netflix, ride-sharing apps like Uber and physical goods purchased online.

Chief Justice John Roberts dissented, along with Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan, saying USA lawmakers should take up the issue. The Supreme Court decision clears the way for states to unwind that competitive advantage. Now, rivals will be charging sales tax where they hadn't before. In 2014, Amazon, the largest online retailer, began collecting the tax in Florida after it opened a series of "fulfillment centers" in the state.

The case is South Dakota v. Wayfair, 17-494. Supreme Court decision expanding the ability of states to pull in tax dollars from online purchases could have a significant impact in Florida.