U.S. Supreme Court rules online retailers must collect sales tax

The American Supreme Court has overturned an earlier (Quill) case, ruling that e-Commerce businesses will now be required to collect sales taxes, regardless of whether they have a physical presence in the state sold to.

The case – South Dakota v Wayfair Inc – is being seen as a small victory for bricks and mortar businesses disadvantaged against online retailers who until now have been exempt from charging the taxes that they do. The earlier Quill ruling had asked businesses to collect state sales taxes, but only from residents of states where the business had a presence on the ground.

The move is expected to generate tens of millions in revenue for states applying the rule; and there’s the catch, though unlikely, it appears the legislation could be vetoed at state level. 45 states currently apply a sales tax.

“States had this authority taken from them decades ago,” said Deborah White, general counsel for the Retail Industry Leaders Association. “Most will work quickly and judiciously to reclaim their authority and create a level playing field for all retailers selling to customers in their states.”

“Retailers have been waiting for this day for more than two decades. The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well. This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both,” added the National Federation of Retailers CEO Matthew Shay of the ruling.

Applied to those shipping more than $100,000 in online sales, or 200 orders annually, the court ruled 5-4 in favour of the change.

“Today’s ruling will give every retailer the opportunity to compete on a level playing field without government’s thumb on the scale – that’s a win for all those who believe in free markets,” concluded White. “For the consumer, this means an increasing array of options both in-store and online, with competition for their business based on price, service, selection and value -not special tax treatment.”