Online Sales Tax Case: What Lies Ahead for Out-of-state Retailers
Andrea Martinez 13 Apr 2018

Online Sales Tax Case: What Lies Ahead for Out-of-state Retailers

NEW YORK (AP) - Supreme Court will hear arguments in the South Dakota v. Wayfair case – a decade-old dispute over states’ authority to collect sales taxes on internet retail – on Tuesday, April 17, 2018.

The case is a challenge to a 1992 Supreme Court ruling on Quill Corp. v. North Dakota – which barred states from collecting sales tax from out-of-state online retailers. Essentially, the Dakota v. Wayfair, Inc. case raises questions whether retailers must collect taxes from online retailers in a state where they don’t have a physical presence.

However, the state and local government have been pushing for having power to collect sales taxes for internet purchases in recent years – stating that the rapid growth of e-commerce has made it difficult for governments to reach their revenue targets.

In fact, as per a 2017 study conducted by the U.S. Government Accountability Office, “states miss out on up to $13 billion a year in sales taxes from online and catalog purchases, because of the SC ruling which predated the rise of widespread online retailing”.

If the court agrees to government official request to collect sales taxes from out-of-the-state retailers, many small retailers could be forced to start charging their out-of-state customers for making purchases online. Some businesses fear that such a decision could deter customers, who are used to tax-free shopping, from making purchases online. 

During the upcoming hearing, the U.S. Supreme Court will hear online retailers Wayfair and Newegg – challenging a South Dakota law authorized last year requiring out-of-state retailers having sales of over $100,000 or over 200 transactions a year in the state to collect sales tax. Some sources believe that such a decision could have national repercussions on e-commerce, even though Congress can pass legislation later that broadens or narrows the law.

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