High Court Tax Ruling Won't Curb Amazon Dominance

High Court Tax Ruling Won't Curb Amazon Dominance

If a company doesn't expect to reach the threshold in a state, it may decide not to collect tax.

Gov. Pete Ricketts was among those opponents, although he had been seeking a compromise at the time the bill failed. The Quill decision has been the source of ongoing controversy, and the state of South Dakota set out to test it.

The court's 5-to-4 decision could have an impact on millions of Americans nearly immediately.

The ruling means some states can expand their tax collection systems, but it will take months to get systems up and running, Behlke said.

In a concurring opinion, Justice Clarence Thomas said that after ruling for the retailer in 1992, he had changed his mind. That older case prevented states from collecting a sales tax from retailers without a physical presence in their state.

The typical retailer on eBay sells between $10,000 and $500,000 annually, with customers in more than 300 tax jurisdictions.

"E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule", he wrote. The losers, said retail analyst Neil Saunders, are online-only retailers, especially smaller ones.


The decision allows states to require out-of-state businesses to collect sales tax from customers in other states - for example, a retailer in Utah who sells goods to a customer in NY would have to calculate and collect the NY sales tax.

The Big Q: How can states collect it? This has resulted in billions of dollars of lost sales taxes every year, and given online retailers an advantage over their brick-and-mortar counterparts.

Home goods seller Wayfair and other e-commerce companies had attempted to challenge a South Dakota law that levies taxes on purchases made through certain online retailers.

"As Amazon has continued to thrive despite losing the obvious pricing benefit it used to have from not collecting sales taxes in its proprietary business, it remains to be seen if this new ruling will have any real impact on its third-party sales, or if the convenience for shoppers and growing benefits to Prime members will mitigate the pricing shift", he said. This latest Supreme Court ruling said that earlier decision was obsolete in an era of explosive e-commerce. Customers were generally supposed to pay the tax to the state themselves if they don't get charged it, but the vast majority didn't.

Soon after the South Dakota law passed, South Dakota took it to court with retailers Newegg, Wayfair and Overstock, alleging that the companies failed to comply with their state sales tax laws. In Wayfair v. South Dakota, the Court concluded that the "sales tax nexus" previously articulated by the Court in Quill v.

Director of the West Virginia University Bureau of Business and Economic Research John Deskins says the 1992 Supreme Court ruling was based on catalog sales not internet sales. Although Act 41 was patterned after the South Dakota law, there are differences that sellers could focus on to question the law's validity.

"It's a great day for South Dakota and Main Street America", said South Dakota Attorney General Marty Jackley.

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