In a case involving MA online retailer Wayfair, the US Supreme Court Thursday opened the door for states to collect sales taxes on products their residents buy from Internet retailers in other states.
In a 5-4 ruling the justices said an old rule whereby only businesses that had a physical presence in a state could be subject to sales taxes was a vestige of the mail-order catalog era, and no longer applies in the internet age.
The high court has said for more than 50 years in various rulings that states can not collect taxes from sellers without a "physical presence" in those states.
"The Internet's prevalence and power have changed the dynamics of the national economy", wrote Justice Anthony Kennedy in the majority opinion.
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Brick-and-mortar retailers had argued that they were at a disadvantage under the previous law because they have to charge sales tax at the time of purchase, while online retailers did not in states where they had no physical presence or warehouse.
The decision has major implications for online retailers, including Amazon. It also impacts Amazon, but only for the goods it sells from third-party merchants. They said local tax laws vary widely across the nation and calculating sales taxes for 10,000 local taxing jurisdictions remains a daunting task.
It ruled that the provision amounted to a "judicially created tax shelter" that put some companies at an advantage.
Forty-five states rely on sales taxes for revenue, and for those states that have no income tax, sales taxes are very important. Chief Justice John Roberts joined Stephen Breyer, Sonia Sotomayor and Elena Kagan in the dissent.
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South Dakota was backed by 35 states in the case, each of which filed an amicus brief in support of online sales tax.
South Dakota wanted out-of-state retailers to begin collecting the tax and sued several of them: Overstock.com, electronics retailer Newegg and home goods company Wayfair.
The current regulation "allows remote sellers to escape an obligation to remit a lawful state tax is unfair and unjust", added Kennedy.
South Dakota has estimated that it could take in up to $50 million a year in additional revenue with these taxes being collected. Sellers who use eBay and Etsy, which provide platforms for smaller sellers, also haven't been collecting sales tax nationwide.
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