Supreme Court To Rule On Sales Tax Of Online Purchases

Supreme Court To Rule On Sales Tax Of Online Purchases

North Dakota, which says retailers only have to collect sales tax in states where they have a physical presence.

The justices will hear arguments in the case on Tuesday against a backdrop of Trump's harsh criticism of Amazon.com Inc, the dominant player in online retail, on the issue of taxes and other matters. "The "economic presence' test set forth in this case is a far better yardstick for State authority over absentee retailers and will ensure that large online retailers are playing by the same rules as their brick and mortar counterparts".

"The current tax system favors online retailers over brick-and-mortar businesses, and undermines fair and open competition in the marketplace", the National Retail Federation argues in a brief it filed in the case.

However, in 2016, South Dakota passed a law requiring retailers with at least 200 transactions or $100,000 in sales per year in the state to collect state taxes.

Based on a prevailing Supreme Court law, retailers can be forced to collect taxes only in states where the company has physical presence.

Retailers like Amazon, Walmart, Target, Apple and other major companies do now collect sales tax via their ecommerce channels, so that's not what this case is after.


Amazon, which is not involved in the Supreme Court case, collects sales taxes on direct purchases on its site but does not collect taxes for items sold on its platform by third-party venders, constituting around half of total sales.

In 1992, during the era of mail-order catalog shopping, the Supreme Court ruled that retailers can only be required to collect taxes in states where the company has an actual store or physical presence.

South Dakota depends more than most states on sales taxes because it is one of nine that do not have a state income tax. States say they're losing out in billions of dollars in tax revenue.

This law was challenged by the state of South Dakota as it seeks to collect sales taxes from out-of-state internet retailers.

"Those smaller retailers are now starting to see an ability to compete with the big guys like Amazon and Walmart", said Sam Cinquegrani, CEO of ObjectWave, a digital strategy and services firm.

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