Published: Thu, June 21, 2018
Hi-Tech | By Preston Stone

Supreme Court rules that internet sales can be taxed by states

Supreme Court rules that internet sales can be taxed by states

Louisiana is one of the states that can now collect taxes on retail sales over the internet after a Thursday morning ruling by the U.S. Supreme Court.

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.

This overturns a decision from 1992 that mandated that states could levy taxes on businesses only if they had a brick-and-mortar presence within that state's borders.

"The Internet's prevalence and power have changed the dynamics of the national economy", wrote Justice Anthony Kennedy in the majority opinion.

But Wayfair, an online furniture shop, and other retailers argued that handling the nuanced sales tax rules in each state would be impossible for small online retailers and would put them out of business.

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States will be able to force shoppers to pay sales tax when they make online purchases under a Supreme Court decision Thursday that will leave shoppers with lighter wallets but is a big win for states. It's likely to negate some of the price advantages that come from buying online, as you might guess, but there's also the possibility of creating headaches for smaller e-commerce outfits that might lose a price advantage over heavyweights already paying state sales taxes. Chief Justice John Roberts dissented along with Stephen Breyer, Sonia Sotomayor, and Elena Kagan.

But sellers that only have a physical presence in a single state or a few states could avoid charging customers sales tax when they're shipping to addresses outside those states. Major online retailers such as Wayfair, Overstock, eBay, Shopify and Etsy, opposed the law change. Some Marketplace sellers have contracted with Amazon to collect sales taxes for them.

Some states will still have to pass new legislation to demand tax from out-of-state orders, and that isn't always guaranteed.

The Trump administration had urged the justices to side with South Dakota.

Amazon's stock is down almost a percent since the announcement, Etsy is down 3.12 percent.

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