Online Purchase Sales Tax Fight Heads to SCOTUS


If they have to start complying with the complexities of collecting and remitting sales taxes nationwide, many could be forced to abandon that part of their business.

In dollar terms, the state to gain the most from a court ruling overturning Quill would be California, which could receive $1.7 billion in additional revenue, according to a U.S. Government Accountability Office report released in December.

President Donald Trump has slammed the company, accusing it of paying "little or no taxes" to state and local governments.

As for the burden of dealing with thousands of tax rates across the country, the state says software programs now make it possible for a retailer to instantly compute the correct sales tax simply by entering a buyer's ZIP code.

Overall there are 20 states where at least one third of their revenue is derived from sales taxes, said the report, highlighting how the expected June ruling will have bigger stakes in some states than others.

Chances are good you already do, even though the law requires online retailers to collect the tax only in states where they have a physical presence. Wayfair argues more than 16,000 different taxing units could demand sales tax collections. Sellers say free or low-cost software isn't accurate, more sophisticated software is expensive and that collecting tax nationwide would also subject them to potentially costly audits. Numerous sales on Amazon's and Walmart's sites are actually done by smaller retailers using those sites as their platform.

On Tuesday the Supreme Court is hearing arguments whether to overturn its 1992 decision when it hears a new case focused on online purchases, South Dakota vs. Wayfair.

South Dakota's governor has said the state loses out on an estimated $50 million a year in sales tax that doesn't get collected by out-of-state sellers.

"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.

The Supreme Court has never held that a sales or use tax can be imposed on a retailer who sells to a customer who lives in a state where the company has no physical presence.

South Dakota says the high court's previous decisions don't reflect today's world.

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.

"Today's online giants do not need or deserve the special tax treatment that the Court gave mail order catalog companies a half century ago", Deborah White, General Counsel for the Retail Industry Leaders Association, said in a statement last month. North Dakota that upheld earlier rulings limiting states and localities to collecting sales taxes from only those retailers with a physical presence in their jurisdictions. "A connection to a shopper's favorite store is a click away regardless of how close or far the nearest storefront".