Bottom line: It’s usually the case that buying something online is cheaper than buying it from a physical store. But a landmark ruling means purchasing goods from the internet is likely to become more expensive in the US. In a 5-4 ruling, the US Supreme Court has overturned a 1992 decision that prevented state and local governments from collecting taxes from retailers who lack a “physical presence.”
For those companies who don’t have any offices, warehouses, etc. in a given state, it’s been left to consumers to send the states the taxes on their purchases. This has resulted in billions of dollars of lost sales taxes every year, and given online retailers an advantage over their brick-and-mortar counterparts. Bloomberg estimates that broader taxing power will let state and local governments collect an extra $8 billion to $23 billion a year.
The original 1992 Quill vs North Dakota case related to mail-order catalog purchases. Justice Anthony Kennedy noted the difference between mail-order sales back then, which totaled around $180 billion, and ecommerce sales now. "Last year, ecommerce retail sales alone were estimated at $453.5 billion," he wrote. "Combined with traditional remote sellers, the total exceeds half a trillion dollars."
In 2016, South Dakota passed a law requiring out-of-state companies to collect sales taxes if their total sales exceeded $100,000 or at least 200 transactions.
The court added that companies such as Newegg, Wayfair, and Overstock “each easily meets the minimum sales or transactions requirement of the Act, but none collects South Dakota sales tax.”
While the decision could eventually see online prices rise, it won’t have much of an effect on Amazon. Like most of the other popular online retailers, it already collects sales taxes in all 45 states that require it. However, this only applies to items from its own inventory, not those from third-party sellers.
As reported by CNET, the National Retail Federation, a trade group that includes many of the largest brick-and-mortar US retailers, joined President Trump in hailing the decision as "a major victory."
Big Supreme Court win on internet sales tax - about time! Big victory for fairness and for our country. Great victory for consumers and retailers.— Donald J. Trump (@realDonaldTrump) 21 June 2018
"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," Matthew Shay, federation president and CEO, said in a statement.