South Dakota e-commerce sale tax fight reaches US Supreme Court

South Dakota e-commerce sale tax fight reaches US Supreme Court

The case now before the Supreme Court could affect those third-party Amazon sellers and many other sellers that don't collect taxes in all states - sellers such as jewelry website Blue Nile, pet products site Chewy.com, clothing retailer L.L. Bean, electronics retailer Newegg and internet retailer Overstock.com.

The state sued a group of online retailers after the law was enacted to force them to collect the state sale taxes, with the aim of overturning the precedent.

"Today's online giants do not need or deserve the special tax treatment that the Court gave mail order catalog companies a half century ago", Deborah White, General Counsel for the Retail Industry Leaders Association, said in a statement last month.

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.

"Although online businesses may not have a physical presence in some states, the Web has, in many ways, brought the average American closer to most major retailers", he wrote in suggesting the days of inconsistent sales tax collection may be numbered. Walmart also collects sales tax on all online purchases.

In fact, chances are pretty good that you already pay sales tax on at least some of your online purchases if you live in a state that has sales tax. The company now charges consumers in every state that imposes a sales tax, but only when selling products that come from its own inventory. But a case before the Supreme Court could change that.

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And while the issue is portrayed as one of fairness for small brick-and-mortar retailers that have to compete against online retailers, experts say those small retailers could be among the ones that get hurt.

It's unclear how the justices might align on the question this time.

South Dakota and its allies say "physical presence" is an increasingly elusive concept in the era of internet storefronts and smartphone apps.

On Tuesday, the Supreme Court is scheduled to hear South Dakota vs. Wayfair to determine whether to overturn that 26-year-old ruling.

Although South Dakota's tax law applies only prospectively, critics say overruling Quill could open retailers to years of retroactive liability in other states. South Dakota and other state and local governments say they've been cheated out of billions of dollars because of this rule. The court reaffirmed that ruling in 1992. But online-only merchants-especially the large number of independently-owned businesses on sites like Etsy and Ebay-worry that this is more of a cash grab by state and local governments. But three justices - Neil Gorsuch, Clarence Thomas and Anthony Kennedy - have suggested a willingness to rethink those decisions.

"We have waited more than 25 years for Congress to act and they haven't", White said.

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