Supreme Court Rules States Can Require Online Retailers to Collect Sales Tax

(From NBC News)

The justices broke with 50 years’ worth of legal rulings that barred the states from imposing sales taxes on most of the purchases their residents make from out-of-state retailers.

The decision was a victory for South Dakota, which asked the court to uphold its recently passed law imposing an Internet sales tax. “Our state is losing millions for education, healthcare, and infrastructure, and our citizens are harmed by an uneven playing field,” said Marty Jackley, South Dakota’s attorney general.

In 1967, the Supreme Court ruled that states could not force mail-order catalog companies to collect sales taxes unless a buyer lived in a state where the company had a physical presence — a retail store, a headquarters, or a distribution center, for example. The court reasoned then that the volume of mail order business was minor compared to in-store sales and that catalog companies would face too big a burden in having to figure out the correct sales tax, given widely different rates around the country.

South Dakota concluded in 2016 that the explosion in online sales changed the market dramatically. So it passed a law requiring all but the smallest retailers, including Internet companies, to collect taxes on the sales they make in the state, even if they had no physical presence there.

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