Today (June 21), the Supreme Court overturned a tax-related 1992 ruling giving states and local governments the ability now to collect possibly billions in internet sales tax from customers.
The original 1992 ruling from Quill v. North Dakota focused on catalog and mail-order purchases and required that businesses must have a physical presence within a state for the state to collect income taxes. Bloomberg reports the courts 5-4 vote to overturn the 1992 ruling has caused shares of companies such as Newegg, Wayfair, and Overstock who were cited in the court’s decision plus Amazon.com Inc. to plunge. Amazon who was not mentioned in the case does charge sales tax in states that impose it but only on products sold from their own inventory.
Justice Anthony Kennedy who delivered the courts opinion said the 1992 ruling is now”obsolete” being that we are now in the e-commerce era. With the courts ruling, internet companies can now be required to collect states sales tax in states where they don’t have a physical presence. Estimates are projecting states and local governments could pull in $8 billion to $23 billion a year in revenue.
While small businesses who find it difficult trying to compete with online retailers are celebrating this victory, it’s not a slam dunk for other states to follow South Dakota. Washington lawyer, Andy Pincus who filed a brief on behalf of eBay and a group of other small businesses said the ruling was not a “green light” for other states. He also stated, “they’re going to have to meet some additional constitutional tests.”
This could be considered a victory for traditional retailers and could possibly level the playing field, but one thing is certain you online shoppers will be dishing out more cash. Let us know how you feel about the Supreme Court’s decision below.
Photo: Wutthichai Luemuang / EyeEm / Getty