Online Retailers May Collect Billions in Sales Tax

Online brands and retailers don’t have to charge the 6 percent sales tax that they include at brick-and-mortar stores. This financial discrepancy is at the heart of a multibillion-dollar US Supreme Court case. The discussion is set to take place on Tuesday, May 17, 2018.

Traditional retailers and state legislatures are asking the court to overturn a 26-year-old ruling that exempts internet merchants from collecting billions of dollars in sales tax. The 1992 court ruling only forces online merchants to collect a tax if they have a physical presence. This includes a store or warehouse in the state. The general counsel of the Retail Litigation Center’s Deborah White says,

“That rule doesn’t make sense anymore in today’s world of e-commerce.”

As a result of this new ruling, online retailers will be put under pressure. This includes Overstock.com Inc., Ebay Inc., Etsy Inc., and thousands of smaller enterprises.

In addition, the broader taxing power requested by the state would let the government collect an extra $8 billion to $23 billion per year.

“Physical presence” is an elusive concept in the age of internet storefronts and smartphone apps. The state is pressing for the court to permit sales tax on companies with an “economic presence” in a state.

Three current justices Clarence Thomas, Anthony Kennedy, and Neil Gorsuch have expressed concern and skepticism about the proposed precedent. Regardless of the court decision, Congress has the final say. Amazon and Overstock are leading voices that support this nationwide law.

Deborah White says this issue has been present since 1992. This means Congress has waited for over 25 years to act on this matter. The name of the case is South Dakota v. Wayfair, 17-494.

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