This week the Supreme Court is considering a case that could end for good a precedent that allows online retailers to not charge sales tax.
On Tuesday, the justices will hear arguments in South Dakota v. Wayfair Inc., in which the state of South Dakota is seeking to overturn a 1992 decision in Quill v. North Dakota, which says retailers only have to collect sales tax in states where they have a physical presence. South Dakota and other state and local governments say they’ve been cheated out of billions of dollars because of this rule.
The case is especially timely since President Donald Trump has publicly blasted Amazon for not collecting sales taxes, even though it does so on its own sales.
In fact, chances are pretty good that you already pay sales tax on at least some of your online purchases if you live in a state that has sales tax. Amazon collects sales tax on its own products, but not on other businesses’ products that are sold through its website. Walmart also collects sales tax on all online purchases.
The ability to avoid paying sales tax was one of the attractions of online shopping in its early days. But professor and state and local taxation expert Hayes Holderness told the Washington Post that today the convenience of online shopping outweighs the tax benefit for most consumers.
Still, the change in precedent could put a burden on small- and medium-size online retailers who will have to navigate up to 16,000 different taxing units, according to Wayfair, which wants the current rule should stay in place.
The Trump administration, for its part, has chimed in on the matter, arguing in favor of requiring online retailers to pay sales tax.
The Supreme Court is expected to issue a decision in June.