Supreme Court: States Can Collect Sales Tax On E-Commerce

In a win for brick-and-mortar retailers nationwide, the Supreme Court of the United States overturned a landmark 1992 decision mandating that sellers without a physical presence in states did not need to collect sales tax.

The 5-4 ruling, handed down June 21, dealt a blow to online sellers, who have long held that collecting sales tax from buyers in multiple states constituted an unreasonable burden. The decision bolstered state treasuries and traditional retailers, though, the latter having argued that the previous laws put them at a competitive disadvantage.

Jennifer Hatfield, APSP’s director of government affairs, issued a statement praising the decision and its potential to level the playing for its brick-and-mortar membership.

“Online retailers who sell pool and spa products have had an unfair advantage over our brick and mortar APSP members — the Court’s decision hopefully will bring balance and fairness when our members compete with online stores. However, we also recognize this is a first step, as many states will have to change their own laws to take advantage of the Court’s decision and it still may take Congress acting to fix the problem entirely, by streamlining the process to complete the fairness to everyone including the small online retailers.”

The National Retail Federation, a trade group representing retailers across the United States, was similarly pleased.

“Retailers have been waiting for this day for more than two decades,” said Matthew Shaw, president and CEO of the NRF. “The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well. This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.”

At the heart of the matter was a law passed in South Dakota in 2016 that directly challenged the court’s 1992 ruling in Quill v. North Dakota, which held that requiring businesses to collect sales taxes in states where the didn’t have a physical presence was unconstitutional. Now that the precedent has been overturned, states will be free to demand online sellers collect and submit those taxes.