Supreme Court clears way to collect sales tax from online retailers
Internet retailers can be required to collect sales taxes in states where they have no physical presence, the Supreme Court ruled on Thursday, June 21.
Brick-and-mortar businesses have long complained that they are disadvantaged by having to charge sales taxes while many of their online competitors do not. States have said that they are missing out on tens of billions of dollars in annual revenue under a 1992 Supreme Court ruling that helped spur the rise of internet shopping.
On Thursday, June 21, the court overruled that ruling, Quill Corporation v. North Dakota, which had said that the Constitution bars states from requiring businesses to collect sales taxes unless they have a substantial connection to the state.
Writing for the majority in the 5-to-4 ruling, Justice Anthony M. Kennedy said the Quill decision had distorted the nation’s economy and had caused states to lose annual tax revenues between $8 billion and $33 billion.
“Quill puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers,” he wrote. “Remote sellers can avoid the regulatory burdens of tax collection and can offer de facto lower prices caused by the widespread failure of consumers to pay the tax on their own.”