High Court To Hear Bid To Collect Internet Sales Tax

The Supreme Court will revisit a 26-year-old ruling that has made much of the internet a tax-free zone.

The Court will hear oral arguments April 17 in South Dakota v. Wayfair (case 17-494). The justices are being asked to overturn the Court’s 1992 Quill v. North Dakota ruling, which decreed retailers can be forced to collect sales taxes only in states where the company has a “physical presence.” 

The Quill decision was handed down in an era when out-of-state vendors were almost exclusively catalog retailers, and years before the explosion in online sales that dominate today’s marketplace. Traditional brick-and-mortar retailers that have to collect sales taxes feel they’re at a competitive disadvantage, and states are potentially losing out on billions of dollars in revenue annually.

State and local governments could have collected up to $13 billion more in 2017 if they’d been allowed to require sales tax payments from online merchants and other remote sellers, according to a report from the Government Accountability Office, Congress’s nonpartisan audit and research agency. Other estimates are even higher. All but five states impose sales taxes.

Among those supporting South Dakota at the high court are 35 other states, and lawmakers who say they’ve been trying for years to get Congress to address the issue.