In Wayfair case, Supreme Court to let states collect Internet sales tax

He was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel A. Alito Jr. and Neil M. Gorsuch.

As an example, lawyers for the online retailers told the high court that in IL, a Snickers bar costs more in taxes than a Twix bar, since food items containing flour are not treated as candy for tax purposes.

The court chose to overturn a 1992 decision that a physical presence was necessary to require retailers to collect and send sales taxes to a state. This ruling could help clear away any legal objections to taxes like Chicago's Netflix tax.

On a 5-4 vote, the high court overruled a 1992 decision that forbid states from requiring businesses to collect taxes on internet sales.

"Rejecting the physical presence rule is necessary to ensure that artificial competitive advantages are not created by this court's precedents", Kennedy said.

They had resulted in some companies not collecting sales tax on every online purchase.

"When the day-to-day functions of marketing and distribution in the modern economy are considered, it is all the more evident that the physical presence rule is artificial in its entirety", Justice Anthony Kennedy wrote.


Each state has a complex sales tax system, which was cited in the 1992 Quill case as a reason against requiring businesses to collect the dues in states where they had no physical presence.

Only five states do not collect a statewide sales tax.

But sellers that only have a physical presence in a single state or a few states could avoid charging customers sales tax when they're shipping to addresses outside those states. The law required out-of-state sellers who do more than $100,000 of business in the state or more than 200 transactions annually with state residents to collect sales tax and turn it over to the state.

Shares of online retailers fell sharply following the ruling, with Wayfair down 3.8 percent, Overstock off 2.1 percent and Etsy Inc shares off 4.4 percent.

South Dakota has estimated that it could take in up to $50 million a year in additional revenue with these taxes being collected.

Three identical bills were filed during the special session to match Louisiana's law with South Dakota's in case the U.S. Supreme Court allows...

  • Kara Saunders