Our Opinion: 'Wayfair' decision benefits state, traditional retailers

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The ruling potentially means thousands of small businesses that never collected sales tax except in their home states will be responsible for tax in some 10,000 state and local jurisdictions nationwide.

He said this ruling from the Supreme Court should not affect their customers much, if any.

"Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the states", he wrote in an opinion joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito and Neil Gorsuch.

Whether the state sales tax now required for online retailers will make consumers run back to brick and mortar stores remains to be seen.

"Today's decision culminates years of tireless work by the retail community to reverse a pre-internet era rule that distorts free markets and puts local brick and mortar stores at a competitive disadvantage with their online-only counterparts", said Deborah White, general counsel and president of the Retail Industry Leaders Association (RILA)'s Retail Litigation Center.

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Online retailers will have to deal with a hodgepodge system until Congress enacts a federal standard, which is unlikely this year given the midterm elections in November. For more information about resources for sales and use tax compliance, visit cpa.com/vertex.

Second, the Court's decision now compels one party (the seller) to enforce a law the state claims another party (the buyer) is violating. With the state having no income tax and no capital gains tax, the sales tax provides more than 50 percent of government revenue. But the changes could deeply impact smaller vendors who sell their products through e-commerce giants like Amazon.com, Inc., and eBay Inc., removing the slight tax advantage previously enjoyed by those firms. A number of software applications have been created to help sellers comply with the myriad taxing jurisdictions. The law requires out-of-state sellers who do more than $100,000 of business in the state or more than 200 transactions annually with state residents to collect sales tax and send it to the state.

Justice Anthony Kennedy wrote that the previous decisions were flawed. In dissent, Chief Justice John Roberts said Congress should be making this decision, not the courts. However, the Court noted that the South Dakota tax scheme included several features created to prevent discrimination against or undue burdens on interstate commerce, including (1) the sales thresholds in the law, (2) that the law was not retroactive, and (3) that South Dakota was one of more than 20 states that have adopted the Streamlined Sales and Use Tax Agreement, a uniformity agreement created to reduce administration and compliance costs for retailers. Customers in growing numbers have embraced the convenience and effectively "tax-free" benefits of online shopping, even if they sometimes had to pay for shipping.

If you enjoyed the illicit thrill of avoiding the 6.25 percent IL sales tax on Internet purchases of running shoes or steaks, you'll mourn the court's opinion in South Dakota v. Wayfair.

Kennedy didn't directly decide whether states could try to collect taxes retroactively, but he said the issue wasn't a reason to keep the physical-presence rule.

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As for the argument about the impact on smaller online merchants, Shearman said mom-and-pop stores are the ones that have been disadvantaged in the 26 years since Quill.

"The Supreme Court's decision is an important win for retail fairness".

The Trump administration had urged the justices to side with South Dakota.

Wayfair, the lead defendant in the case, said in a statement the company "welcomed the additional clarity" of the ruling.

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