US Supreme Court to review bid to collect Internet sales tax

WASHINGTON: US Supreme Court will consider freeing state and local governments to collect billions of dollars in sales taxes from online retailers, agreeing to revisit a 26-year-old ruling that has made much of the internet a tax-free zone.

Heeding calls from traditional retailers and dozens of states, the justices said they will hear South Dakota’s contention that the 1992 ruling is obsolete in ecommerce era and should be overturned.

State and local governments could have collected up to $13 billion more in 2017 if they’d been allowed to require sales tax payments from online merchants and other remote sellers, according to a report from the Government Accountability Office, Congress’s nonpartisan audit and research agency. Other estimates are even higher.


All but five states impose sales taxes. Online retailers Wayfair Inc, Overstock.com Inc and Newegg Incare opposing South Dakota in court. Each collects sales taxes from customers in only some states.

The case will also affect Amazon. com, though the biggest online retailer isn’t directly involved. When selling its own inventory, Amazon charges sales tax in every state that imposes one, but about half of its sales involve goods owned by third party merchants. For those, the company says it’s up to sellers to collect any taxes, and many don’t.

Court probably will hear arguments in April with a ruling by end of its nine-month term in late June.

‘PHYSICAL PRESENCE’
The high court’s 1992 Quill v. North Dakota ruling, which involved a mail-order company, said retailers can be forced to collect taxes only in states where the company has a “physical presence.”