SUPREME COURT RULES IN FAVOR OF COLLECTION OF STATE SALES TAX FOR INTERNET SALES
July 11, 2018
On June 21, 2018, the U.S. Supreme Court ruled in favor of allowing states to collect sales taxes from online retailers that do not have a physical presence in their borders.
As noted by Justice Kennedy, who wrote the opinion, the case has broad implications for commerce in the digital age: “Each year the physical presence test becomes further removed from economic reality and results in significant revenue losses to the States…These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the commerce clause.” Kennedy stated that the test was “estimated to cost the states between $8 billion and $33 billion annually.”
Internet retailers would have to comply with sales tax requirements in more than 12,000 jurisdictions nationwide as well as burdensome rules concerning retroactive tax obligations.
During oral argument in April, some justices noted that computer software could ease the process of paying out-of-state sales taxes, and that Amazon and other retailers are already collecting sales taxes from some or all states.
If you have any questions, please contact Evelyn Sahr (esahr@eckertseamans.com or 202-659-6622); Drew Derco (dderco@eckertseamans.com or 202-659-6665), or Alexander Matthews (amatthews@eckertseamans.com or 202-659-6633).
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