wnol.info July 21 2018

Supreme Court Rules In Internet Sales Tax Case

July 21 2018, 07:53 | Alexander Lowe

Pool Getty Images

Pool  Getty Images

IN lawmakers anticipated the ruling in 2017 when they passed a law that imposed sales tax on companies that did at least $100,000 worth of business or more than 200 separate transactions in the state in a year.

In the early days of the internet, online retailers were exempted from sales taxes in states in which they did not have a physical presence.

Big chains have been collecting sales tax nationwide because they typically have physical stores in whatever state a purchase is being shipped to.

The high court ruled Thursday to overturn those decisions.

The decision, in which South Dakota prevailed over the online furniture retailer Wayfair, immediately sent ripples through the internet shopping industry sending shares tumbling in Amazon, eBay, Etsy and others.

State officials - including in SC, with its 6 percent sales tax - have argued they were losing out on millions - if not, in some cases, billions - of dollars in revenue a year under the Supreme Court's previous 1992 decision.

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"Each year, the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the states", said Supreme Judge Anthony Kennedy and added that the criticism only emphasizes that the rule of physical presence is an erroneous interpretation of the Trade Law.

Conservative Chief Justice John G. Roberts Jr. led the dissent, joined by three Democratic-appointed justices. "We're very excited to see what the Supreme Court did".

A 5 to 4 ruling from the Supreme Court will change that, but Kevin McCarthy with the Arizona Tax Research Association says the impact won't immediately be felt in Arizona.

The Trump administration backed South Dakota in the case, arguing that no one could have foreseen how rapidly e-commerce would expand.

Last year, the Government Accounting Office estimated that state and local governments were collecting 75% to 80% of the taxes they are owed from "remote sellers", but they were nonetheless losing between $8 billion and $13.4 billion a year in uncollected taxes for online sales. "This decision will allow states the ability to level the playing field for all retailers". "No longer should out-of-state online only businesses have an unfair price advantage over our friends and neighbors who own local businesses". The law makes an exception for companies with less than $100,000 in annual sales or 200 transactions in the state, seeking to help smaller retailers compete with big e-commerce incumbents. That means the case will be sent back to South Dakota for a final decision.

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