Court ruling clears way for Iowa to collect new sales taxes

Yuri Gripas  Reuters

The Supreme Court of the US (SCOTUS) has just overruled 1992's Quill Corp v.

States may force online retailers to collect potentially billions of dollars in sales taxes, the U.S. Supreme Court said in a major ruling on Thursday that undercut an advantage many e-commerce companies have enjoyed over brick-and-mortar rivals. "The storefront on Main Street is paying property taxes in their local community; they're paying the person that's helping you try on the shoes, and they've got to pay for the inventory", she said, but they lose a lot of sales because people know they can buy the same shoes online without paying taxes".

Justice Anthony Kennedy wrote that the previous decisions were flawed.

South Dakota had challenged the physical-presence rule, saying it was losing roughly $48 to $58 million in revenue each year. Justices Ruth Bader Ginsburg, Clarence Thomas, Samuel Alito and Neil Gorsuch joined his opinion.

Another potential consumer impact: If all states require businesses to collect sales taxes, individual taxpayers wouldn't have to figure out our use taxes come tax time. This overturns a decision from 1992 that mandated that states could levy taxes on businesses only if they had a brick-and-mortar presence within that state's borders. That's because they typically have a physical store in whatever state the purchase is being shipped to.

Amazon, with its network of warehouses, voluntarily collects sales tax in every state that charges it, though third-party sellers who use the site to sell goods don't have to. While retailers were not required to collect sales tax, that tax was technically still owed. States were missing out on around 25 percent of the tax from online sales, according to the Government Accountability Office, meaning $13 billion in missed sales.

Levine/NewscomToday the Supreme Court overturned past decisions and ruled, 5-4, that states may potentially demand that businesses that don't have actual physical presence within their borders still pay sales taxes on what they sell to residents who live there. Wayfair already collects and remits sales tax on approximately 80 percent of our orders in the United States, a number that continues to grow as we expand our logistics footprint. Amazon began collecting sales taxes on purchases in every state past year, though it does not collect sales taxes on purchases made through third-party vendors. But it's also "much bigger than that", Jackley said.

Hurst called the court's decision "a huge win for actual brick and mortar stores on our Main Streets and also for the commonwealth and other states for obtaining fair taxation".

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"It will make it an even playing field for retailers in the state of Colorado to now compete with retailers out of state", Hartman said. Some states that lack a broad sales tax, including New Hampshire, Montana and Washington, had submitted arguments to the court taking the opposite position.

Conservative Chief Justice John G. Roberts Jr. led the dissent, joined by three Democratic-appointed justices.

Nothing will change immediately after this ruling.

South Dakota specifically brought this lawsuit against Wayfair, Overstock.com, and Newegg.

Still, Amazon used the law for many years to avoid collecting sales taxes initially on its book sales and then other merchandise. Lawmakers in the state, which has no income tax, passed a law created to directly challenge the Supreme Court's 1992 decision in Quill Corp vs.

The law specifically protects small businesses from collecting sales taxes if they have less than $100,000 in sales or fewer than 200 transactions in the state.

Wayfair said that it "welcome [s] the additional clarity provided by the Court's decision today".

For one, there is no certainty that other states will follow South Dakota's example and only apply the tax to large businesses, or that they will not include retroactive taxes: lawmakers will be very tempted to try to reap a financial windfall from the change in the law.

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