US Supreme Court Rules States Can Require Online Merchants to Collect Sales Tax--Update

By Brent Kendall

The Supreme Court handed states broad authority Thursday to require online retailers to collect sales taxes, overturning a pre-Internet court precedent that had effectively exempted many merchants from collection duties.

The court, in a 5-4 decision written by Justice Anthony Kennedy, ruled that states can require internet merchants to collect the taxes even if the merchant has no physical presence in the state.

The ruling likely will spell the end of an era in which consumers could save on taxes by purchasing goods online instead of from local merchants.

The justices' decision overturned a 1992 high court ruling involving mail-order businesses that said states can only require tax collection by merchants who are physically located in the state's borders.

The ruling is a victory for states that argued tax-free internet sales were costing them billions in revenue. It is also a big win for brick-and-mortar stores that were competing against online rivals, who didn't collect the taxes on internet purchases.

Some large online retailers, such as Amazon.com Inc., already collect state sales tax on products they sell directly, but others don't. Amazon also hasn't collected the taxes for most independent merchants who sell items on Amazon's platform.

The case before the high court was brought by the state of South Dakota, which enacted a law in 2016 that required merchants to collect the tax. The state then set the stage for test litigation by suing out-of-state online sellers, including Wayfair Inc., Overstock.com Inc. and Newegg Inc.

(More to Come)

(END) Dow Jones Newswires

June 21, 2018 10:51 ET (14:51 GMT)

Amazon.com (NASDAQ:AMZN)
Historical Stock Chart
From Mar 2024 to Apr 2024