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Supreme Court to hear case concerning sales tax on items purchased online

January 17, 2018 00:52·

The Supreme Court weighed in first in 1967, ruling that states can not force "catalog" retailers to collect sales taxes in states where they are not physically present. from neighboring North Dakota was handed down in 1992 - "before Amazon was even selling books out of Jeff Bezos's garage", lawyers for South Dakota told the court.

Mainstreet retailers say they have to collect the tax on their sales - and that gives the Internet firms an unfair advantage. The State of South Dakota is funded largely by sales tax dollars so Cammack says the lost revenue due to the loophole that now exists strains the state's budget.

The state said the growth of e-commerce in the past 25 years has "imploded" the legal rationale used in the 1992 case, known as Quill v.

Just over a quarter-century ago, the court ruled that a state could not force mail order catalog companies to collect sales taxes unless they had a physical presence in the state. If South Dakota wins its case against Wayfair, Overstock and Newegg, the Quill decision would be overturned.

Sales taxes are a crucial source of revenue in the 45 states that collect them.

Colorado's reporting regime was upheld as constitutional by the U.S. Court of Appeals for the Tenth Circuit in Direct Marketing Association v. Brohl.7 After the Court denied cert in that case, several states enacted similar reporting regimes.

"The case is supposed to be heard in April, with a final decision possible in June", said Jamie Yesnowitz, Grant Thornton principal and SALT National Tax Office Leader at Grant Thornton. The court said the state can not require out-of-state sellers to collect sales taxes.

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"We look forward to seeing how the Court will handle both the procedural and substantive aspects of the case". The court also urged Congress to address the issue through legislative efforts.

"If the Court is fine with how the case got there, will the Court decide to overrule this precedent on the grounds that a physical presence rule is not workable in an electronic-based economy?"

"Given the built-in, indeed intended, difficulties in enacting federal laws, the current Quill determined status quo places a very large thumb on the scales on the side of out-of-state sellers", the brief said.

A friend-of-the-court brief in support of South Dakota was filed by more than a dozen state and local government groups led by the National Governors Association and NCSL that includes mayors and public education associations. "A South Dakota small business, for instance, could be forced to comply with 1,000 different tax structures nationwide without the tools necessary to do so".

"The state will need to overcome the constitution's plain language leaving matters of interstate commerce to Congress, decades of precedent limiting the exercise of sales tax power within its own borders, and the fact that their law does not even attempt to meet the burdens of due process", Moylan said in a statement.

"The retail community is grateful that the Court has recognized the extraordinary importance of this issue", she added.

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