Large online retailers, like Amazon, tend to collect sales tax in most states, but not all.
Now, with Amazon selling everything and Wal-Mart running Anita Ward choruses 24/7 about how they'll ship their stuff to your door, things have changed a bit, and the Supreme Court has ruled accordingly - overturning fifty years of precedent.
The top court in the USA has ruled that states can force online companies to collect sales tax from their customers. 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.
Kennedy's opinion was backed by Clarence Thomas, Samuel Alito, Ruth Bader Ginsburg and Neil Gorsuch. "These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause", he wrote. That's because they typically have a physical store in whatever state the purchase is being shipped to. It also provides sellers access to sales tax administration software paid for by the State. Some Marketplace sellers have contracted with Amazon to collect sales taxes for them. Sellers who use eBay and Etsy, which provide platforms for smaller sellers, also haven't been collecting sales tax nationwide.
The US Supreme Court on Thursday gave states the ability to require online and out-of-state retailers to collect and send them state sales taxes.
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But Wayfair, an online furniture shop, and other retailers argued that handling the nuanced sales tax rules in each state would be impossible for small online retailers and would put them out of business. Chief Justice John Roberts joined Stephen Breyer, Sonia Sotomayor and Elena Kagan in the dissent.
South Dakota concluded in 2016 that the explosion in online sales changed the market dramatically.
South Dakota is leading the legal charge, passing a law requiring the collection of sales tax on Internet vendors with at least 200 yearly transactions or $100,000 in sales to its residents. Lawmakers in the state, which has no income tax, passed a law created to directly challenge the Supreme Court's 1992 decision. "State taxes fund the police and fire departments that protect the homes containing their customers' furniture and ensure goods are safely delivered; maintain the public roads and municipal services that allow communication with and access to customers".
South Dakota had challenged the physical-presence rule, saying it was losing roughly $48 to $58 million in revenue each year. Amazon.com Inc. shares fell as much as 1.9 percent before paring losses.