SCOTUS: States Can Make Online Sellers Collect Sales Tax

Washington--The U.S. Supreme Court has made way for states to begin collecting sales tax from all online sellers by overturning a decision made when only 2 percent of Americans had internet access and mail-order catalogs were king.

Quill Corp. v. North Dakota (1992), which barred states from collecting sales tax from sellers that do not have a physical presence in the state, was overturned by a vote of 5-4, the court announced Thursday morning.

Justice Anthony M. Kennedy authored the concurring opinion, joined by Justices Ruth Bader Ginsberg, Samuel A. Alito Jr., Neil M. Gorsuch and Clarence Thomas.

“Quill puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers,” he wrote. “Remote sellers can avoid the regulatory burdens of tax collection and can offer de facto lower prices caused by the widespread failure of consumers to pay the tax on their own.”

(When consumers buy an item online and do not pay sales tax at the time of the purchase they are required by law to report and pay it when they do their annual income taxes, though hardly any do so.)

“In effect,” the concurring opinion continues, “Quill has come to serve as a judicially created tax shelter for businesses that decide to limit their physical presence and still sell their goods and services to a state’s consumers—something that has become easier and more prevalent as technology has advanced.”  

Chief Justice John Roberts and Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan dissented, with Roberts stating that while e-commerce has grown into a “significant and vibrant” sector of the economy, the changing of the physical presence rule ultimately should be left up to Congress.

He noted the costs this decision will impose on retailers of all sizes, as they grapple with how to navigate the web of complex tax laws that vary from jurisdiction to jurisdiction.

“The burden will fall disproportionately on small businesses,” Roberts wrote in the dissenting opinion. “One vitalizing effect of the internet has been connecting small, even ‘micro,’ businesses to potential buyers across the nation. People starting a business selling their embroidered pillowcases or carved decoys can offer their wares throughout the country—but probably not if they have to figure out the tax due on every sale.”

The Supreme Court decision to overturn Quill is seen as a victory by many brick-and-mortar sellers