States Can Tax Amazon Marketplace

Yuri Gripas  Reuters

Shares in Wayfair, an online furniture company that is one of the firms involved in the court case, fell by more than 1%. Big online retailers have, in many cases, managed to avoid paying sales tax when selling goods to consumers because previously, courts said that a company must have a physical presence in the state to be taxed.

Officials say that a U.S. Supreme Court ruling that retailers must collect sales tax from buyers in other states could mean more than $200 million a year to IL. "Now everybody is going to be collecting sales tax whether you order from Amazon or anywhere online".

The 1992 decision eventually gave a huge boost to out-of-state online retailers in that they received a consistent state tax subsidy with every sale that their in-state and local competitors - brick-and-mortar and online alike - did not receive.

Under South Dakota's law, online retailers with more than $100,000 in annual sales or more than 200 transactions in the state are required to pay a 4.5 percent sales tax on all purchases.

"The physical presence rule has always been criticized as giving out-of-state sellers an advantage".

Chief Justice John Roberts, joined by Justices Stephen Breyer, Elena Kagan and Sonia Sotomayor, dissented.

Shoppers were generally supposed to pay the sales tax to the state themselves, but most didn't, says Gerald Storch, who was CEO of department store operator Hudson's Bay and now runs a retail consulting firm.

Walmart also praised the Supreme Court for "closing a loophole" that "produced an uneven playing field for main street businesses".

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Lower courts ruled against the state's law, following the physical presence precedent.

"This will go a long way to ensure local businesses are on a level playing field with online retailers", he said.

Although he does not support a general sales tax in the state, he expects others could use this ruling in support of their arguments for a sales tax to increase state revenue.

"The burden will fall disproportionately on small businesses".

South Dakota passed a law in 2016 that would require out-of-state retailers to collect and remit sales tax similar to in-state retailers.

South Dakota wanted out-of-state retailers to begin collecting the tax and sued several of them: Overstock.com, electronics retailer Newegg and home goods company Wayfair.

The Trump administration had urged the justices to side with South Dakota.

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