The Supreme Court’s 5-4 decision overruled two, decades-old Court decisions that states...
UNITED STATES.- States will be able to force more shoppers to pay sales tax when they make online purchases under a Supreme Court deci- sion Thursday that will leave shoppers with lighter wallets but is a big financial win for states.
Consumers can expect to see sales tax being charged on more online purchases — likely over the next year and potentially before the Christmas shopping season — as states and retailers react to the court’s decision, said one attorney involved in the case.
The Supreme Court’s 5-4 decision Thursday overruled two, decades-old Supreme Court decisions that states said cost them billions of dollars in lost revenue annually. The decisions made it more difficult for states to collect sales tax on certain online purchases, and more than 40 states had asked the high court to overrule them.
The cases the court overturned said that if a business was shipping a customer’s purchase to a state where the business didn’t have a physical presence such as a warehouse or office, the business didn’t have to collect the state’s sales tax. Customers were generally responsible for paying the sales tax to the state themselves if they weren’t charged it, but most didn’t realize they owed it and few paid justice Anthony Kennedy wrote that the previous decisions were flawed.
“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States,” he wrote in an opinion joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito and Neil Gorsuch. Kennedy wrote that the rule “limited States’ ability to seek longterm prosperity and has prevented market participants from competing on an even playing field.”
The ruling is also a win for large retailers, who argued the physical presence rule was unfair. Large retailers including Apple, Macy’s, Target and Walmart, which have brick-and-mortar stores, already generally collect sales tax from their customers who buy online.