On Tuesday, the Supreme Court of the United States will hear a case regarding the current status of online sales tax collection and whether the law as-is requires a more modern update. As CNN explains it, the current law requires that “online retailers to collect the tax only in states where they have a physical presence,” which is why big companies like Amazon and Walmart already collect sales tax on purchases made in the 45 states that require it. However, NBC News notes that customers making online purchases from states that don’t require sales tax collection are exempt from it. Tuesday’s arguments may change this.
With South Dakota vs. Wayfair, the National Retail Federation hopes to overturn the court’s previous 1992 decision, which seemingly allowed big online retailers to flourish (and avoid collecting sale tax on all purchases, for all customers in all states) while smaller businesses couldn’t cope:
A reversal could mean that all online retailers must collect sales tax everywhere. It’s an issue that brick-and-mortar retailers insist will provide a level playing field with online competitors, and help to provide state and local governments with the tax revenue they deserve.
“The current tax system favors online retailers over brick-and-mortar businesses, and undermines fair and open competition in the marketplace,” the National Retail Federation argues in a brief it filed in the case.
A Supreme Court decision in favor of smaller retailers would also overturn a 1967 decision in which they previously “ruled that states could not force mail-order catalog companies to collect sales taxes unless a buyer lived in a state where the company had a physical presence.” South Dakota recently determined “that the explosion in online sales changed the market dramatically” and subsequently “passed a law requiring all but the smallest retailers, including Internet companies, to collect taxes on the sales they make in the state, even if they had no physical presence there.”
While President Trump recently raised the issue of online sale tax collection during an ongoing spat with Amazon, analysts note that his efforts here have had little effect on the Supreme Court’s decision to hear the case, which has been years in the making. That being said, CNN reports representatives from the Trump White House “will join the oral argument in favor of online retailers being required to collect sales taxes everywhere.”