US Supreme Court to Hear Case on Ecommerce Taxation

Leslie Hanson
January 13, 2018

For cash-strapped state and local governments, though, the power to impose online sales taxes on remote sellers might have helped them raise as much as $13 billion previous year, according to one federal estimate.

As we explained in a recent amicus brief urging the Court to take the case, South Dakota's sales tax is uniquely well-structured, as it is one of a few states that taxes most all final goods and services.

The U.S. Government Accountability Office estimated in a November report that states and municipalities could gain between $8 billion and $13 billion in annual revenue if they could require online retailers to collect sales tax.

The U.S. Supreme Court has agreed to take up a South Dakota case this term that could reset the balance between online and physical store sellers by requiring taxation of goods sold by out-of-state merchants, Bloomberg has reported. "Even if the court rules in favor of a modern sales tax policy, legislation will still be needed to spell out how that would work".

The Supreme Court agreed Friday to wade into the issue of sales tax collection on internet purchases in a case that could force consumers to pay more for certain purchases and allow states to recoup what they say is billions in lost revenue annually. According to one estimate cited by the states in a brief they filed with the high court, they'll lose out on almost $34 billion in 2018 if the Supreme Court's previous rulings stand. Hoping to launch a legal battle that would lead the Supreme Court to reconsider its 1992 decision, the state sued out-of-state Internet retailers.

South Dakota's law was passed partly in response to a concurring opinion written by Justice Anthony Kennedy in a unanimous 2015 Supreme Court ruling that allowed a challenge to a Colorado law encouraging retailers to collect the taxes to go forward. That's proof that "the "problem" of uncollected taxes", the retailers involved in the case said in their court brief, "has proven to be largely self-correcting".

The top of U.S. Supreme Court building is lit at dusk in Washington, U.S., December 18, 2017.

Some online retailers, including leading player Inc, already collect state sales tax but others do not. The court will hear the case this spring. "Unfortunately, antiquated sales tax collection rules have resulted in an uneven playing field that's making it harder for Main Street retailers to compete in today's digital economy", said Matthew Shay, president of the National Retail Federation trade group.

"The fact that the Supreme Court has made a decision to reconsider its outdated ruling is encouraging, and we are hopeful it will lead to a positive outcome that reflects the realities of 21st century commerce", Shay said. "This is a basic question about fairness, which all of our members deserve whether they're selling in stores or online".

Other reports by Iphone Fresh

Discuss This Article