WASHINGTON – States now have authority to make online retailers collect sales taxes, the US Supreme Court ruled Thursday, siding with South Dakota in ruling against several online companies.
In a 5-4 decision, the court overturned the 1992 precedent that barred states from requiring businesses without a physical presence in the state to collect sales taxes.
In 2016, South Dakota passed a law requiring large out-of-state online retailers to collect sales tax. Wayfair Inc., Overstock.com, and Newegg Inc. challenged the law in court. While the court revived the law, it could still face other legal challenges, according to Justice Anthony Kennedy, who authored the ruling.
The court deemed the earlier, 1992 ruling out-of-date in the Internet era.
Other states have passed similar laws and more are likely to now. A federal report said forcing online retailers to collect sales taxes could add $13 billion annually to state treasuries. South Dakota estimated it may make as much as $50 million a year in additional revenue.
North Carolina likely to pass similar bill
A similar law, North Carolina Senate Bill 81, modeled on the South Dakota law, would require online retailers with at least 200 sales or $100,000 in revenue yearly in the state to collect sales tax. Amazon and several other online retailers already collect sales taxes in NC, but many others do not. The bill passed the state Senate in 2017 but was shelved by the House.
Interest it was revived in March 2018 in anticipation of the Supreme Court ruling on the South Dakota case. It has passed several readings in the state legislature and has been referred to the committee on finance.
The state passed legislation in 2009 commonly called the “Amazon Law,” in an earlier attempt to collect sales taxes from online sellers.
Barclay’s research suggests states likely to see the biggest gains are Louisiana, Tennessee, South Dakota, Oklahoma, and Alabama.
