The Supreme Court called the old ruling « unsound and incorrect. »
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The Supreme Court threw out previous precedent on Thursday to allow states to collect sales tax from online vendors, a major change that represents higher prices for online consumers, but a huge financial win for states.
In a 5-4 decision, the court overturned decades-old decisions blocking states from taxing online purchases if the vendor had no “physical presence” in that state, according to The Associated Press .
The new ruling will force online retailers to pay billions more in taxes, dealing a blow to smaller companies that were previously exempt from state taxes.
The high court called the 1992 decision limiting states’ ability to tax online retailers “unsound and incorrect.”
The Trump administration sided with larger retailers with brick-and-mortar stores or warehouses throughout the country, like Apple and Amazon, who have argued that the old ruling unfairly targeted them since they have physical locations in multiple states, letting smaller vendors get away without paying state taxes.
“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States,” wrote Justice Anthony Kennedy in the court’s opinion. He argued that the rule “limited States’ ability to seek long-term prosperity and has prevented market participants from competing on an even playing field.”
Kennedy was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito, and Neil Gorsuch to make the decision.
Chief Justice John Roberts offered the dissenting opinion, along with Justices Stephen Breyer, Elena Kagan, and Sonia Sotomayor. Roberts argued that the decision isn’t one that should be decided by the Supreme Court.
“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. Any alteration to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress,” Roberts wrote.
The case also stemmed from a challenge from the state of North Dakota, which argued that it was losing an estimated $50 million in taxes because of the previous rules.
Now it’s up to Congress to figure out a system for interstate commerce that’s simple enough for small businesses to manage while still allowing states to determine how taxes will be collected.
Aaron Credeur is a News Fellow at IJR. He has written on a variety of national topics, including the 2016 presidential election, the state of liberal… more
