High Court Grapples With Thorny Sales Tax Case


South Dakota, joined by most states, including Pennsylvania, have asked the U.S. Supreme Court to clear things up so they can know who can be forced to collect sales tax from online sales. "Their argument is, the law ought to be is there an economic presence, which would be hard from a physical presence and if there's a substantial economic presence in the state, then that e-store should be required to collect the same sales tax that any other business in that state would charge".

Right now, billions of dollars in online sales skip state sales taxes thanks to a precedent set by a 1992 ruling.

At issue is a 1992 ruling involving mail-order catalogs when the justices found that states may not require out-of-state mailers to collect sales taxes on behalf of their residents.

Following his arguments before the nation's high court, Attorney General Jackley said he stood before the United States Supreme Court fighting for South Dakotans and to give main street businesses an equal playing field with out-of-state companies.

The court's interest in reexamining the physical-presence rule comes from a case Brann and Isaacson litigated in front of the court in 2014-2015 for the Direct Marketing Association.

It will be interesting to see what the Supreme Court does.

The Department of Revenue announced last May that Wayfair, the company challenging the South Dakota law, had agreed to collect sales tax from purchases in this state.

In the early days of ecommerce, nearly no online merchants collected sales tax, a savings for consumers that helped to offset shipping costs.

But Gorsuch said "there are a lot of retailers that have to comply with lots of different jurisdictions' rules", and he wondered why the court should favor one business model over another.

But Justice Ruth Bader Ginsburg said it should not be left to Congress to grapple with the courts previous decision. North Dakota and violates the Internet Tax Freedom Act (ITFA) enacted by Congress in 1998.

Tuesday's case, South Dakota v. Wayfair Inc.et al, stems from a law South Dakota passed in 2016 that required online retailers to collect sales tax if their sales reached $100,000 or 200 separate transactions.

"As the chair of the Advisory Commission on Electronic Commerce, we recommended back in 2000 that Congress require states to deliver substantial simplification and reform of their sales tax systems before erasing the physical presence standard of Quill". Justice Sonia Sotomayor broke in first, asking why states couldn't just make their own citizens pony up rather than get into the constitutional problem of interfering with interstate commerce. Tax rates and rules vary not only by state but also by city and county.