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South Dakota v. Wayfair decision allows states to collect online sales tax
Caroline Corona   on Friday, June 22, 2018 at 12:00:00 am

On June 21, the Supreme Court released its decision in South Dakota v. Wayfair, ruling that states can require online retailers to collect sales tax. The decision overturned the 1992 Quill v. North Dakota case that prohibited states from collecting sales tax from retailers with no locations or employees in the state. The case was heard based on the court’s dormant commerce clause, which restricts state taxation of interstate commerce; but the dissenting opinions wrote that the matter should be determined by Congress, not the court (U.S. Legal).

States are now able to collect billions from online retailers. Nineteen of the 20 largest retailers already collect state sales tax, and many who support the ruling say that the court’s 1992 decision was outdated for today’s economy. E-commerce is expanding rapidly, and the Government Accountability Office reported that states may have foregone as much as $13.7 billion in tax revenues from online retailers in 2017.

Some are concerned that the ruling will pave the way for states to enact more expansive and convoluted online sales tax laws because the court only judged South Dakota’s. Small businesses that conduct online sales are especially concerned that they will be forced to keep track of and comply with thousands of local sales tax policies. The debate will continue as states see how far they can go, and companies have called on Congress to enact federal standards.

The case made its way up the court system after South Dakota passed a law in 2016 that required retailers with more than $100,000 in annual sales or 200 transactions in the state to pay a 4.5 percent sales tax, and sued the online furniture company Wayfair when it failed to comply.