The United States Supreme Court Allows All States to Tax Sales Online

Be Ready to Pay More for Your

Be Ready to Pay More for Your

IL is ready to hit the ground running after a U.S. Supreme Court decision handed down Thursday gives states the authority to make remote online retailers collect sales taxes and fork the money back to the state where the sale took place. The state conceded in court, however, that it could only win by persuading the Supreme Court to do away with its physical presence rule.

Thursday's ruling by the Supreme Court (5-4 decision) reversed a 26 year-old ruling where a company must have a physical presence in the state to charge a sales tax. The state appealed the decision, and the Court reversed its 1992 decision on Thursday.

"Quill creates rather than resolves market distortions", the ruling says. The pre-internet era physical presence rule put "local businesses ... at a competitive disadvantage relative to remote sellers", and it "produced an incentive to avoid physical presence in multiple states", Kennedy wrote in his opinion.

Speaking for the majority, Justice Anthony Kennedy argued that, by requiring a physical presence, the current system will "embroil courts in technical and arbitrary disputes about what counts as physical presence". For small businesses, this could mean a more even playing field, since large online retailers have been able to skirt taxes in states where they don't have a physical presence. North Dakota, which said mail orders from out-of-state companies didn't have to add sales tax.

After the decision, Amazon shares fell almost 2 percent.

Many bike retailers do some e-commerce to complement their brick-and-mortar sales. But the resulting legislative fallout could have an impact.

Quill is a precedent that traditional retailers have sought to overturn for 20 years - because they believe it gives e-commerce sellers an unfair price advantage.

For the many third-party sellers on Amazon's platform, it's more of a gray area. Brick-and-mortar retailers are big winners, and some big internet retailers such as Amazon may come ahead as well as they sell tax-collection services to smaller firms.

The decision today opens the door for states to pass new legislation and begin collecting more sales taxes from online sellers.

The Supreme Court vote was five to four.

"In Florida, it is the buyer's responsibility to pay tax directly to the state; there's actually a (form for a) separate 6 percent tax for out-of-state purchases".

Still, the ruling was a central topic of discussion Thursday in the House, where lawmakers in a special session are haggling over sales tax measures aimed at lessening steep budget cuts that hit in July.

Rep. Suzan DelBene (D-WA) cheered the ruling in a statement.

"It's a small part of the total sales and use tax revenue, but it's significant", he said.

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