Big Bucks At Stake In SCOTUS Sales Tax Case

Lloyd Doyle
April 16, 2018

Large retailers such as Apple, Macy's, Target and Walmart, which have a physical presence nationwide, generally collect sales tax from customers who buy from them online. South Dakota projects its revenue losses because of online sales that do not collect state taxes at around $50 million annually, while its opponents in the case estimate it as less than half that figure.

South Dakota says it is looking to start collecting taxes only for future online sales, but But Wayfair's attorneys argue in court filings that many other states and local governments could demand years of back sales taxes, forcing retailers to go through costly audits of past sales and make back payments that could bankrupt some companies.

If it's reversed, that could mean all online retailers have to collect taxes everywhere.

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.

A ruling favouring South Dakota could help small brick-and-mortar retailers compete with online rivals while funnelling up to $18 billion into the coffers of the affected states, according to a 2017 federal report.


Many smaller retailers don't; unless they have a physical presence in the state where the buyer lives.

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.

Whatever ruling that the Supreme Court will issue would likely affect the national e-commerce and online shopping industry. Numerous sales on Amazon's and Walmart's sites are actually done by smaller retailers using those sites as their platform.

"Things have changed a lot since 1992".

Online retailers said reversing the 1992 precedent is a negative move in terms of e-commerce. "These online companies have taken advantage of a bygone decision in order to evade the tax collection duties that their brick and mortar competitors perform every day". Amazon collects sales tax on its own products, but not on other businesses' products that are sold through its website.

Other reports by Iphone Fresh

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