Published: Wed, April 18, 2018
Markets | By Erika Turner

Should all online retailers collect sales tax? Supreme Court could soon rule

Should all online retailers collect sales tax? Supreme Court could soon rule

At issue is whether online merchants collect your state's sales tax when it adds up your purchases.

"Representing retailers both large and small, NRF has been working with policymakers to rectify this disparity for almost two decades", Shay said.

"The very goal of the Commerce Clause was to ensure a national economy free from such unjustifiable local entanglements", they wrote in court documents. "There's older caselaw that, in essence, predates the Internet and in that older caselaw the Supreme Court said, states, no you can't tax a business not in your state".

But retailers believe that overruling Quill will force retailers to comply with thousands of complex and variable state and local sales tax regimes.

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South Dakota Attorney General Marty Jackley speaks outside the Supreme Court after the court hears oral arguments on a case involving a rule stemming from two, decades-old Supreme Court cases on state's sales tax collection, Tuesday, April 17, 2018, in Washington.

South Dakota is looking to overturn a 1992 precedent that only allows states to collect sales tax on companies with a physical presence in the state. At the time, the court was concerned in part about the burden collecting sales tax would place on the catalog company. Customers are generally supposed to pay the tax to the state themselves, but the vast majority don't. But other online sellers do not collect, and NRF said in a second brief filed with other retail groups last month that lack of uniform collection is "inflicting extreme harm and unfairness" on local retailers by "distorting the retail market in favor of absentee ecommerce". They say more sophisticated software is expensive and collecting taxes nationwide would also subject them to potentially costly audits.

Congress weighed in on the issue past year, as a bipartisan group of senators introduced the Marketplace Fairness Act, legislation that would require all businesses selling online to collect sales tax for the state where the consumer making the purchase resides. Treasury Secretary Steve Mnuchin told a Congressional hearing in February that Trump believes sales tax should be paid on all purchases, whether they are made in a brick-and-mortar store or online. Several other justices seemed sympathetic to South Dakota. Smaller merchants selling on online marketplaces could have had between $3.9 billion and $6.2 billion in sales taxes collected from them in 2017, according to the Government Accountability Office, as cited by WSJ.

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