States can now force online retailers to collect sales tax

States can now force online retailers to collect sales tax

He was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel A. Alito Jr. and Neil M. Gorsuch.

The decision will also have dramatic consequences for small online retailers that do business in many states. Recently that has been expanding with States pushing to get sales taxes on sales even when the company does not have a physical presence in that area. This ruling could help clear away any legal objections to taxes like Chicago's Netflix tax.

South Dakota then filed a lawsuit to declare that the new law was valid, a suit that eventually found its way to the Supreme Court.

"When the day-to-day functions of marketing and distribution in the modern economy are considered, it is all the more evident that the physical presence rule is artificial in its entirety", Justice Anthony Kennedy wrote. Until now, online retailers with no physical presence in a state were not.

State and local governments had grown increasingly agitated as sales from brick and mortar retailers gave way to online retail, which now comprises approximately 9.5% of the dollar value of total purchases. That's because they typically have a physical store in whatever state the purchase is being shipped to. The state enacted a law requiring out-of-state sellers to collect and send it sales taxes, but only if they deliver more than $100,000 of goods or services into the state or make 200 or more transactions.

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President Donald Trump has also criticized Amazon, whose founder Jeff Bezos also owns the Washington Post, saying that it does not collect any sales tax.

South Dakota wanted out-of-state retailers to begin collecting the tax and sued several of them:, electronics retailer Newegg and home goods company Wayfair.

That said, South Dakota's tax system includes several features that appear created to prevent discrimination against or undue burdens upon interstate commerce.

Internet companies opposed to the South Dakota law appealed.