High court hears internet tax collection case

She said she sells to every state in the U.S. However, with the booming online shopping nationwide, state and local government say they are missing out on millions of sales taxes dollars.

The justices were hearing arguments in a case that deals with how businesses collect sales tax on online purchases at sites from Amazon.com to Zappos. But both laws conflict with a 1992 Supreme Court ruling that retailers had to have a physical presence in the state to collect local sales tax.

At issue is whether online merchants collect your state’s sales tax when it adds up your purchases. As Alito has reminded the court before, the Constitution’s framers wanted to prevent states from imposing taxes and regulations that discourage the free flow of goods and services across the nation. If the Court finds for South Dakota, it would overturn Quill Corp. v. “Why doesn’t that suggest that there are greater significance to the arguments” that the court should leave its current rule in place, he asked. The bill was re-introduced in the years that followed, but Congress failed to enact legislation despite support from across the political spectrum. But Congress, buffeted by anti-tax groups, has walked away from the issue… The ruling largely applied to mail-order sales, but was subsequently put to use for online sales as well.

Consumers spent more than $450 billion online past year, often without paying a sales tax. The case centered around whether federal courts had jurisdiction to hear an appeal of a Colorado law that compelled retailers such as Amazon and L.L. Bean to report customer’s purchasing activity so the state revenue authority could collect sales tax directly from customers.

At Tuesday’s oral argument, Justice Sonia Sotomayor raised that concern.

“When I read your briefs, I thought absolutely right”, Justice Stephen Breyer said. “How much does it cost him to enter that market?”

Three justices – Anthony Kennedy, Clarence Thomas and Neil Gorsuch – have questioned the wisdom of Quill.

The final major disagreement centered on whether the court should back off and let Congress fix the problem, even when it has taken no action since the last ruling on this question in 1992.

That precedent was formed in a very different retail landscape that lacked today’s online capabilities.

George S. Isaacson, who represented the online retailers, said states also require physical forms and paperwork that must be collected.

According to October 2017 data from tax software company Vertex, there are now at least 10,814 sales tax jurisdictions in the United States, up more than 800 since we explored this trend in 2014.

The Supreme Court is expected to rule on the case by late June. When a South Dakota resident buys furniture from a store across the border in Montana, South Dakota doesn’t require the brick-and-mortar seller to remit sales tax. In 2008, NY pioneered what became known as the “Amazon tax” or “click-through nexus” by creating nexus for our-of-state vendors through their use of in-state, click-through advertisements. Several other justices seemed sympathetic to South Dakota.