Supreme Court Rules for Internet Sales Tax

 Alexa Lardieri
  22nd-Jun-2018

THE SUPREME COURT ON Thursday ruled that states can charge out-of-state retailers sales tax even if the retailers don't have a warehouse or store in the state.

The court's 5-4 decision in South Dakota v. Wayfair Inc. is a victory for the states and means shoppers may have to pay sales tax when making online purchases. According to the majority opinion written by Justice Anthony Kennedy, states have been losing billions of dollars a year, largely due to a 1992 decision in Quill Corporation v. North Dakota that largely exempted online retailers from sales tax collection. South Dakota loses an estimated $48 to $58 million a year, the court's South Dakota decision stated.

The Quill decision forbade states from collecting sales tax if companies don't have a "connection" to the state.

But Thursday's ruling stated the the Quill decision was made in error and that the "internet revolution" has made that error "all the more egregious and harmful." It also stated that during the Quill case the court "did not have before it the present realities of the interstate marketplace, where the internet's prevalence and power have changed the dynamics of the national economy."

The change has major implications for online retailers, including Amazon, Etsy and Wayfair. According to CBS News, Wayfair stock was down 2.5 percent in this morning's trading, while Etsy's was down more than 3 percent. Amazon shares dropped 1.3 percent, MarketWatch reported.

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