Supreme Court rules states can require online retailers to collect sales tax

[mahatmakanejeeves]

Source: NBC News

Supreme Court rules states can require online retailers to collect sales tax

The justices broke with 50 years' worth of legal rulings that barred the states from imposing sales taxes on most of the purchases their residents make from out-of-state retailers.

by Pete Williams / Jun.21.2018 / 10:22 AM ET

WASHINGTON -- Online shopping will soon become more expensive, after the U.S. Supreme court ruled Thursday that states can require Internet retailers to collect sales taxes.

The justices broke with 50 years' worth of legal rulings that barred the states from imposing sales taxes on most of the purchases their residents make from out-of-state retailers. ... The decision was a victory for South Dakota, which asked the court to uphold its recently passed law imposing an Internet sales tax. "

In 1967, the Supreme Court ruled that states could not force mail-order catalog companies to collect sales taxes unless a buyer lived in a state where the company had a physical presence -- a retail store, a headquarters, or a distribution center, for example. The court reasoned then that the volume of mail order business was minor compared to in-store sales and that catalog companies would face too big a burden in having to figure out the correct sales tax, given widely different rates around the country.

South Dakota concluded in 2016 that the explosion in online sales changed the market dramatically. So it passed a law requiring all but the smallest retailers, including Internet companies, to collect taxes on the sales they make in the state, even if they had no physical presence there.

Read more: https://www.nbcnews.com/politics/supreme-court/supreme-court-rules-states-can-require-online-retailers-collect-sales-n873416

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Trump will be crowing about this; it's a big setback to Amazon and Jeff Bezos.

{edited} Maybe not: From the article:

President Donald Trump gave the issue renewed visibility when he tweeted in early April that Amazon pays "little or no taxes to state & local governments." That wasn't correct: The company has collected taxes since April 1, 2017, on sales to customers in the 45 states that collect them. That leaves out only Alaska, Delaware, Montana, New Hampshire and Oregon. Some local communities have sales taxes in Alaska and Montana, but they are not levied statewide.

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Previously:

Quill Corp. v. North Dakota

https://en.wikipedia.org/wiki/Quill_Corp._v._North_Dakota

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#SCOTUS rules that states can charge out-of-state retailers sales tax, at least in some circumstances, even if they don't have a store or warehouse in the state, clearing the way to allow sales taxes on internet purchases.

Link to tweet

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Here's the #SCOTUS opinion in South Dakota v. Wayfair: https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf ...

Link to tweet

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From Live blog of opinions (with First Mondays)

http://www.scotusblog.com/2018/06/live-blog-of-opinions-with-first-mondays/

4 minutes ago
"The Quill Court," Kennedy says, didn't write with the realities of today's internet marketplace in mind.

Amy Howe

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5 minutes ago
Kennedy writes that stare decisis -- the idea that the Court's earlier decisions should generally be adhered to -- "is not an exorable command."

Amy Howe

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5 minutes ago
Here's the opinion in South Dakota v. Wayfair. Mark Walsh will have our analysis. Disclosure: G&R was among counsel for the petitioner (South Dakota) in this case.

https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf

[Historic NY]

1. Thats going to filter down to every little person engaging in ebay etc...

[mahatmakanejeeves]

2. More than anyone else, though, it affects Amazon. {Edited: maybe not}

From the article:

President Donald Trump gave the issue renewed visibility when he tweeted in early April that Amazon pays "little or no taxes to state & local governments." That wasn't correct: The company has collected taxes since April 1, 2017, on sales to customers in the 45 states that collect them. That leaves out only Alaska, Delaware, Montana, New Hampshire and Oregon. Some local communities have sales taxes in Alaska and Montana, but they are not levied statewide.

[lagomorph777]

6. And Jeff Bezos owns the Washington Post

...which is why Trump instructed his SCOTUS minions to do this.

[mahatmakanejeeves]

12. But, from the WaPo article:

Congress, the retailers argued, could implement national rules rather than open up the companies to having to deal with the specific requirements of what they say are 12,000 taxing jurisdictions nationwide.

They also said it was a problem that was shrinking rather than expanding.

More retailers are collecting, including 19 of the 20 largest, regardless of whether they have a physical presence in the state, according to briefs filed in the case. Included in that group is Amazon, as well as Walmart, Target and Apple. (Amazon CEO Jeffrey P. Bezos owns The Washington Post.)

{At oral argument, justices divided on states’ ability to tax online sales}

Three large retailers--Wayfair, Overstock and Newegg--do not, and South Dakota sued them for failing to collect taxes after the state’s law went into effect.

From http://www.scotusblog.com/2018/06/live-blog-of-opinions-with-first-mondays/:

28 minutes ago
Kennedy opinion is joined by Thomas, Alito, Ginsburg, and Gorsuch. Thomas and Gorsuch have concurring opinions. Roberts dissented, joined by Breyer, Sotomayor, and Kagan.

Amy Howe

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29 minutes ago
Interesting dissent from the Chief. He would have left this issue to Congress.

Sarah Harrington

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Sarah Harrington
His dissent is joined by Justices Breyer, Sotomayor, and Kagan.

Jun 21 2018 10:21 AM

[lagomorph777]

14. Interesting. Maybe not quite as earthshaking as it appears.

And maybe leveling the playing field is not such a bad thing.

[mahatmakanejeeves]

16. On second thought, that's what I'm thinking.

Amazon saw the writing on the wall a while back, so this doesn't affect them. I don't know if I'd say, "in the least," but for the most part, they have anticipated a decision along these lines.

Wayfair, Overstock, and Newegg have some work to do.

Of course, facts won't stop you-know-who from tweeting madly about this.

I mail ordered something from Radio Shack (yes, there is still a Radio Shack) a few weeks back. I was hit with every sales tax there was.

Thanks for writing.

[mwooldri]

8. Not from the way I'm reading it.

It would certainly affect Amazon, and other large Internet retailers. But the individual seller on eBay - probably not.

To me the majority decision appears that the "physical presence" rule is outdated for the 21st Century, and a new additional rule of "significant virtual presence" should apply.

I, as an individual who occasionally sells stuff on eBay, certainly do not have a significant virtual presence in any state... not even here in North Carolina. eBay has more of a significant virtual presence.... but I'm not eBay.

[bucolic_frolic]

3. This will be recessionary

So if you're online you pay shipping and sales tax. If you're offline you pay transportation and sales tax.

In Pennsylvania they tax shipping too. For online purchases US Postal Service charges are taxed.

[Sherman A1]

4. This will be a game changer

For many.

[mahatmakanejeeves]

5. Supreme Court rules that states may require online retailers to collect sales taxes

Supreme Court rules that states may require online retailers to collect sales taxes

By Robert Barnes June 21 at 10:33 AM [link:[e-mail]|Email the author]

A divided Supreme Court ruled Thursday that states may require online retailers to collect billions of dollars of sales tax revenue owed to them. ... The decision was 5 to 4.

More than 40 states and the Trump administration asked the Supreme Court to overturn its 1992 decision in Quill v. North Dakota that restricts states from collecting sales tax from retailers without a physical presence in those states. They said a decision in a case involving mail-order catalogues is obsolete in an era of e-commerce.

After Justice Anthony M. Kennedy, who wrote Thursday’s majority decision, had said the court should reconsider the decision, South Dakota took up the challenge.

{States consider whether states may tax all online sales}

It passed a law requiring retailers with more than $100,000 in annual sales or 200 transactions in the state to pay a 4.5 percent tax. Although technically consumers are required to pay sales tax on all purchases, it is practically impossible to collect without the retailer applying it at the point of sale.
....

Robert Barnes has been a Washington Post reporter and editor since 1987. He joined The Post to cover Maryland politics, and he has served in various editing positions, including metropolitan editor and national political editor. He has covered the Supreme Court since November 2006. Follow @scotusreporter

[SCantiGOP]

7. I think it is fair and sensible

And it levels the field more between local merchants and online giants.
This should lead to more business for local outlets, which is where the decent jobs are in communities.

[DeminPennswoods]

10. Agreed

nt

[mwooldri]

13. I agree it is a fair decision...

... but I just had a horrible thought.

Amazon etc could theoretically set up shop outside the USA. In a friendly jurisdiction with no sales tax. With a Free Trade agreement.

Does this ruling extend internationally? Would Amazon (Cayman Islands) be forced to pay sales tax to South Dakota even though it is not physically present at all in the USA?

[mahatmakanejeeves]

18. That's impossible to imagine.

Amazon has warehouses throughout the country. Its entire model is based on sending the items you ordered right now. No one would wait for their goodies to be sent from the Cayman Islands.

[mwooldri]

21. It's how it works in the European Union right now.

You buy from Amazon, who locate themselves in the most tax advantageous place in the EU. You pay VAT at that country's rates - but you don't easily see it because VAT is included in the purchase price, not as an add-on like sales tax is here. But Amazon will ship from the warehouse in your country.

[mahatmakanejeeves]

22. I did not know that. Thanks. NT

[jberryhill]

29. ebooks, music, video, etc. don't require physical shipment

Much of Amazon's revenue is derived from electronic virtual goods. Those are attributed to Amazon's Luxembourg company.

[jberryhill]

28. That's why, for all electronic virtual goods (ebooks, etc.), Amazon is a Luxembourg company

For purchases other than physical goods, Amazon's operations are legally located in Luxembourg, which has the lowest VAT rate in the EU:

https://www.cnbc.com/2017/10/04/amazon-eu-tax-bill-luxembourg-deal.html

At the heart of the EU's investigation into Amazon is its network of subsidiaries in Europe and so-called transfer pricing. That is the price of goods that one subsidiary of a company sells to another subsidiary under the same corporation. This in itself is not illegal. But what is illegal is if this transfer of goods is mispriced, therefore affecting the profits a company makes, and subsequently how much tax it pays.

In 2004, Amazon restructured its operations to create Amazon EU Sarl, which was its European operating headquarters. Amazon EU Sarl pays a royalty to the parent company in Europe for use of intellectual property. But that parent company is a limited liability partnership, which is not subject to corporate tax in Luxembourg.

[mahatmakanejeeves]

30. So what you and mwooldri are saying is that things that are impossible for me to imagine

can still happen?

???

How is that possible?

Thanks to you and to him for the clarification.

[MicaelS]

9. Inevitable and necessary.

Since local sales are declining, the tax money has to come from somewhere.

[Lheurch]

11. The split of who voted for and against this is quite interesting

[dubyadiprecession]

15. So much for having a conservative Supreme Court!

[Historic NY]

17. Isn't state sales tax a local issue?

The court has enter the states domain, at the very least the prerogative of the congress to create or enact law.

[mahatmakanejeeves]

19. This is interstate commerce. There's lots of precedent.

Interstate Commerce Act of 1887

The Interstate Commerce Act of 1887 is a United States federal law that was designed to regulate the railroad industry, particularly its monopolistic practices. The Act required that railroad rates be "reasonable and just," but did not empower the government to fix specific rates. It also required that railroads publicize shipping rates and prohibited short haul or long haul fare discrimination, a form of price discrimination against smaller markets, particularly farmers in Western or Southern Territory compared to the Official Eastern states. The Act created a federal regulatory agency, the Interstate Commerce Commission (ICC), which it charged with monitoring railroads to ensure that they complied with the new regulations.

The Act was the first federal law to regulate private industry in the United States. It was later amended to regulate other modes of transportation and commerce.

Administrative Procedure Act (United States)

The Administrative Procedure Act (APA), Pub.L. 79–404, 60 Stat. 237, enacted June 11, 1946, is the United States federal statute that governs the way in which administrative agencies of the federal government of the United States may propose and establish regulations. To protect citizens, the APA also grants the judiciary oversight over all agency actions. It is one of the most important pieces of United States administrative law. The Act became law in 1946.

The APA applies to both the federal executive departments and the independent agencies. U.S. Senator Pat McCarran called the APA "a bill of rights for the hundreds of thousands of Americans whose affairs are controlled or regulated" by federal government agencies. The text of the APA can be found under Title 5 of the United States Code, beginning at Section 500.

[yallerdawg]

20. Conservatives raising taxes.

Toss in the tariffs (taxes) and it sure looks like the little people are paying MORE in taxes!

Even with taxes and shipping, internet goods are still cheaper than brick-and-mortar locations with employees standing around waiting for customers who order online.

[former9thward]

31. The court decision was a mixture of liberals and conservatives on both sides.

[End Of The Road]

23. How will sales be verified?

I worked as a bookkeeper for a small online retailer for a couple of years, and we certainly had more than 200 sales in some states each year. The accounting software made it easy to total sales by state. But if, say, Ohio decides to collect state sales tax, how do they know if my company did any business whatsoever in Ohio? If Ohio expects honesty, they wouldn't have gotten it from my boss -- he broke every tax and labor law he thought he could get away with.

But having over 200 sales in Ohio doesn't mean they were all direct to the end user. Many sales were to brick and mortars who wished to carry our product. In this case the brick and mortar would be required to pay state and local tax, not the online retailer. The laws on this will have to take that into account.

For companies as big as Amazon, Wayfair, Overstock et al it's a no-brainier that their sales exceed the threshold. I'm not sure it's enforceable on smaller companies.

[mahatmakanejeeves]

25. Implantable microchips.

You'll be able to get them from Amazon. With a sales tax, of course.

[onenote]

24. Unusual alignment of Justices

Majority: Kennedy, Gorsuch, Alito, Thomas and Ginsburg.
Dissent: Roberts, Kagan, Sotomayor, Breyer

[Crutchez_CuiBono]

26. Boot to the throat.

Gorsuch is an illegitimate judge. It needs to be reversed and reviewed....all of it. its a fraud perpetuated on the people.

[Iliyah]

27. More cost

befalls on the working class and poor . . .

Cost of living is going up, wages are not. Healthcare too expensive, and the safety nets are being destroyed.

[jgmiller]

32. What an unholy alliance of justices

I completely agree with their ruling but my God who would have though that Federalists like Thomas, Alito and Gorsuch would side with Kennedy and Ginsburg to do this? It really is a sign of the end times.