Supreme Court Says States Can Now Collect Sales Tax From All Online Retailers

WASHINGTON, June 21, 2018 – The United States Supreme Court on Thursday dealt a blow to the online retail industry by overturning a 26-year-old ruling, Quill v. North Dakota, which had prohibited states from forcing mail-order retailers to collect sales tax from customers in states where they lacked a physical presence.

The 5-4 ruling on Thursday, in South Dakota v. Wayfair, means customers of online retailers like Amazon will no longer be able to avoid paying their state’s sales tax, and those retailers – which are now some of the largest in the United States – will no longer enjoy an advantage over their brick-and-mortar competitors.

The case could put an end to years of non-stop growth by online-only retailers like Amazon, which many small business owners claim came at their own expense, costing Americans their jobs as the brick-and-mortar retail industry has contracted in the face of online competition.

The decision could provide a needed boost the state and local governments that have long complained that the inability to collect sales tax from online retailers has caused their sales tax revenue to plummet as consumers have increasingly stayed home for even the most basic shopping needs.

Trump weighs in

President Trump took to his Twitter account late Thursday to applaud the ruling.

“Big Supreme Court win on internet sales tax – about time! Big victory for fairness and for our country. Great victory for consumers and retailers,” he wrote.

Trump, who initially entered the public consciousness as a real estate developer, has often suggested that Amazon — the United States’ largest online retailer  — was gaining an unfair advantage over brick-and-mortar merchants from the rules under which online retailers operated until today.

“Unlike others, [Amazon] pay little or no taxes to state & local governments,” Trump wrote in a March 29 tweet attacking Amazon and The Washington Post, which is owned separately by Amazon founder Jeff Bezos.

During his campaign for the presidency, Trump often suggested that Bezos had purchased the Post in order to influence legislation to prevent Amazon from having to pay sales taxes.

Trump’s assertions regarding Amazon and state sales taxes have no connection to reality, as Amazon has paid sales taxes in states which require it for a number of years.

While the president suggested that the ruling would help small businesses, Steve DelBianco, president and CEO of the free-market advocacy group NetChoice, explained that Thursday’s court ruling would actually hurt the small business of which Trump has styled himself a champion.

“While a fraction of online commerce was free of sales tax before this ruling, the Supreme Court has now created an even greater imbalance by placing far greater burdens on Internet shopping compared to its “offline” counterparts,” said DelBianco, whose group has long opposed allowing states to require online retailers to pay sales tax absent a physical presence in a given state.

DelBianco explained that now that Supreme Court has “legislated from the bench,” small online merchants have their “already razor-thin profit margins” cut even further, while brick-and-mortar remain unaffected.

“When these businesses disappear, consumers will be the biggest losers,” he said.

Former Congressman Chris Cox, the group’s outside counsel and author of the Internet Tax Freedom Act, said the court’s decision will do the most harm to small online retailers and those with a single location, “because they can’t afford the overhead to comply with thousands of different tax rules across the country.”

Cox predicted that many small online retailers would be forced to close their doors or be bought out by online retail giants.

“The last hope for consumers and small online business owners is for Congress to take action.  It should be Congress, not the courts, that sets the rules for interstate sales tax collection,” he added.