Supreme Court Clears Way for Sales Taxes on Internet Merchants
Posted June 21, 2018 11:17 a.m. EDT
WASHINGTON — Internet retailers can be required to collect sales taxes in states where they have no physical presence, the Supreme Court ruled Thursday.
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, the court overruled that ruling, Quill Corp. 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.
The vote was 5-4. Justice Anthony M. Kennedy wrote the majority opinion and was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel A. Alito Jr. and Neil Gorsuch.
In the years since 1992, three members of the Supreme Court had indicated that they might be ready to reconsider the Quill decision.
In a 2015 concurring opinion, for instance, Justice Anthony M. Kennedy seemed to call for a fresh challenge to the decision.
“It is unwise to delay any longer a reconsideration of the court’s holding in Quill,” he wrote. “A case questionable even when decided, Quill now harms states to a degree far greater than could have been anticipated earlier.”
South Dakota responded to Kennedy’s invitation by enacting a law that required all merchants to collect a 4.5 percent sales tax if they had more than $100,000 in annual sales or more than 200 individual transactions in the state. State officials sued three large online retailers — Wayfair, Overstock.com and Newegg — for violating the law.
Lower courts ruled for the online retailers in the South Dakota case, citing the Quill decision.
President Donald Trump has criticized Amazon for its tax and shipping practices. Amazon, which is not involved in the case before the Supreme Court, collects sales taxes for goods that it sells directly, but not for merchandise sold by third parties.
Some analysts have said Trump’s critique was motivated by his displeasure with reporting from The Washington Post, which is owned by Amazon’s founder, Jeff Bezos.