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Supreme Court ends tax-free online shopping

by Leigh Jones
Posted 6/21/18, 11:35 am

The Supreme Court ended the era of tax-free online shopping Thursday when it ruled in favor of states demanding internet retailers pay sales tax. The 5-4 ruling reversed two decades-old Supreme Court decisions retailers had used to avoid paying the tax. Those decisions said an online business shipping products to customers in states where it did not have a physical presence didn’t have to collect sales tax. Several states challenged that policy, saying they were losing out on billions in potential revenue generated by the rapidly growing online marketplace. The justices agreed.

“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States,” Justice Anthony Kennedy wrote in the majority opinion. “These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause.” The ruling will not affect many of the largest online shopping sites, like Amazon, which have distribution warehouses across the country and already collect sales tax.

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Leigh Jones

Leigh lives in Houston with her husband and daughter. She is the news editor for The World and Everything in It and reports on education for WORLD Digital.

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  • OldMike
    Posted: Thu, 06/21/2018 03:26 pm

    Thanks a LOT, Supremes!  [sarcasm]

    I would guess a few of the more spendthrift states will welcome this.

    No, who am I kidding?  They ALL welcome more revenue to spend on things perhaps a majority of us would not approve, if allowed to vote on them. 

    Just read yesterday of a lady who went to work for her state’s government when she was 20, got to retire at 50. Understand this is considered appropriate in states with strong unions. But maybe this kind of pension set-up would be one of the things driving some states and cities to bankruptcy. Maybe reforming spending would be better than collecting more taxes?

    Naw. How silly of me. 


  • Kris
    Posted: Thu, 06/21/2018 07:36 pm

    Supremes should have left this to congress.  More legislating from the bench that will cause unintended consequences.  I would guess severe declines of Etsy and Ebay sales, since small operations won't want the risk and hassle of collecting for 50 states.  And it will take a long time for the dust to settle and for states to figure out what they're doing.

  • Nat Manzanita
    Posted: Thu, 06/21/2018 08:23 pm

    I've run a small business selling online to all 50 states. For someone doing that, this ruling is a nightmare! Also, I don't see how the states can enforce it. It's one more example of a law that cannot be effectively enforced on lawbreakers, and that at the same time places a crushing administrative burden on conscientious people who are trying to follow laws they'd never get in trouble for breaking. There are more laws like this every year. I'm worried that they are destroying the very concept of a law-abiding citizen by making it impossible for people to follow all the laws without ceasing to be economically viable and productive.

  • Fuzzyface
    Posted: Thu, 06/21/2018 09:28 pm

    My guess is a computer can figure the tax pretty easily.  The states should set up a website which they keep current. The site should provide a calculator that businesses can download and use or use online.

  • S Smith's picture
    S Smith
    Posted: Sat, 06/23/2018 11:35 am

    I may be in the minority, but as a former owner of a small retail establishment I approve of the Supreme Court's decision regarding sales tax for on-line shopping.  It's hard enough for the "mom and pop's" to compete against on-line entities, but they were being put at an additional competitive disadvantage of having to charge their customers, in our case, 7% more for sales tax than their internet competitors, a charge for which they receive no benefit.  It, in essence, penalized local retailers just because they have a physical presence in the area where they do business.