Internet sales tax ruling a win for brick-and-mortar retailers

Yuri Gripas  Reuters

The Supreme Court of the United States ruled Thursday that online retailers can add state tax to their sales, even if they do not have a physical location in that state.

Over on NBC News, they are reporting that the US Supreme Court has ruled 5-4 that states can now force retailers to collect sales tax on online sales regardless of where the business is located.

Chief Justice John Roberts Jr., who wrote the dissenting opinion, argued that the Supreme Court left this question to Congress in 1992, and Congress has not acted. It passed a law requiring online retailers with $100,000 in sales of goods or with more than 200 transactions to collect and remit a 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.

Meanwhile, Justice Ruth Bader Ginsburg, perhaps the most liberal justice, joined four GOP-appointed conservative members in the majority.

Justice Anthony Kennedy wrote that the physical presence rule "each year. becomes further removed from economic reality and results in significant revenue losses to the states". Investors in the online retail sector must be fearing a backlash from customers who will now be forced to pay more for their online goods. That's because they typically have a physical store in whatever state the purchase is being shipped to. States could enact minimum sales thresholds for triggering the online tax collection.

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Only five states do not have a state-wide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.

One of the big advantages online retailers have had over your local shop is a lack of sales tax.

Lower courts ruled against the state's law, following the physical presence precedent.

States like South Dakota that depend heavily on sales taxes for their revenue are likely to benefit most, with a predicted maximum revenue increase of around 3 percent, according to a Barclays research note. Lawmakers in the state, which has no income tax, passed a law created to directly challenge the Supreme Court's 1992 decision.

After states and traditional retailers have grumbled about this situation for years, South Dakota finally made a decision to do something to change it.

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