The Supreme Court issued a ruling today allowing states to require sales tax for internet sales shipped to their state, even for companies that don’t have any physical footprint in the state. Justice Kennedy was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel A. Alito Jr. and Neil M. Gorsuch in the 5-4 majority opinion.
The case was officially brought by South Dakota against online home good company Wayfair. Also mentioned in the decision are Newegg and Overstock. Online retailer’s stocks fell after the decision was issued.
Many internet companies pushed hard against the measure. Amazon, though, has already been charging and paying sales tax in all states on items sold by the retailer itself, but not for third-party vendor sellers.
Given the decision, it’s safe to assume that all states will soon enough begin requiring taxes for most internet sales shipped into their state. There has been concern, mentioned by Justice Roberts in a dissenting opinion, that this will be tough on small businesses, and it’s possible states will only require larger businesses to remit tax. From the dissent:
Over 10,000 jurisdictions levy sales taxes, each with “different tax rates, different rules governing tax-exempt goods and services, different product category definitions, and different standards for determining whether an out-of-state seller has a substantial presence” in the jurisdiction. Sales Taxes Report 3. A few examples: New Jersey knitters pay sales tax on yarn purchased for art projects, but not on yarn earmarked for sweaters…Texas taxes sales of plain deodorant at 6.25 percent but imposes no tax on deodorant with antiperspirant… Illinois categorizes Twix and Snickers bars—chocolate-and-caramel confections usually displayed side-by-side in the candy aisle—as food and candy, respectively (Twix have flour; Snickers don’t), and taxes them differently.
Regardless, this means some of our online purchases can be getting more expensive. Without getting into the legal nitty-gritty, it does seem overall fair that in our era there shouldn’t be a difference between physical stores and internet retailers. Even the dissenters noted that it should be worked on by congress as opposed to the court, but didn’t attack the idea itself. I also liked how this ruling was non-partisan – it seems everything runs on party lines these days.
