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Online Purchase Sales Tax Fight Heads to SCOTUS

Online Purchase Sales Tax Fight Heads to SCOTUS

But many other smaller retailers don't collect sales tax unless they have a physical presence in the state where the buyer lives, relying on a 26-year old Supreme Court decision that was related to catalog retailers. There are billions of dollars of tax revenue at stake here, as well as a huge potential burden on small businesses.

But e-commerce retailers argue that collecting sales taxes in all 50 states would present complex issues for corporations, requiring them to keep track of 12,000-plus tax jurisdictions within thousands of counties, cities, and even airports that have their own tax requirements.

If it's reversed, that could mean all online retailers have to collect taxes everywhere.

At the time, the court cited state sales tax laws that were too complicated for retailers to know how much to collect unless they had a physical presence in that specific state. "A retailer today can transact a significant amount of business in a state without ever being physically present in the state". "The entire nature of interstate commerce has changed", says Stephanie Martz, general counsel of the National Retail Federation, which has members such as Walmart Inc., Target Corp., and Amazon.

The case is especially timely since President Donald Trump has publicly blasted Amazon for not collecting sales taxes, even though it does so on its own sales.

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South Dakota sued top online retailers Wayfair, Overstock, and Newegg, for failing to comply to the said state tax law. "These online companies have taken advantage of a bygone decision in order to evade the tax collection duties that their brick and mortar competitors perform every day". North Dakota, which says retailers only have to collect sales tax in states where they have a physical presence.

"Things have changed a lot since 1992".

Online retailers said reversing the 1992 precedent is a negative move in terms of e-commerce.

Brian Bieron, eBay's senior director of government relations, said in an interview the 1992 precedent "provides the many small businesses that use the internet with a very clear and simple and stable legal environment in which to grow their business".

According to the Government Accountability Office, online marketplaces could have collected between $3.9 billion and $6.2 billion in state sales tax.