The Supreme Court is reviewing a case stemming from South Dakota in which that state is demanding that web merchants pay sales tax for any transaction with its residents. A 1992 ruling imposed a “physical presence” limitation that let web retailers evade state taxes unless they physically operated in the taxing state.
And surprise, surprise (or not) — the Trump administration, which just lowered taxes across the board, is in favor of letting states collect taxes from any sales made to people living within their borders.
The case in question, South Dakota v. Wayfair, will be heard on April 17. In preparation for that, the administration sent the court a brief by Solicitor General Noel Francisco, which argues: “In light of Internet retailers’ pervasive and continuous virtual presence in the states where their websites are accessible, the states have ample authority to require those retailers to collect state sales taxes owed by their customers.”
Allowing some out-of-state etailers to avoid collecting sales taxes further “imposes a competitive disadvantage on in-state retailers and encourages the state’s citizens to take their business elsewhere,” the breif continues.
Online retailers Wayfair Inc., Overstock.com Inc. and Newegg Inc. are opposing South Dakota in the court fight, saying Congress should set the rules for online taxes.
The stakes are fairly high. The Government Accounting Office (GAO) estimates the states would be $13 billion richer were they able to collect taxes from online merchants. Others predict an even larger take by the state governments.
The federal government is being joined by 35 other states in arguing to reverse the 1992 ruling and allow states to impose taxes on sales made within their borders. Only 5 of 50 states do not impose sales taxes.