The Independent View: Supreme Court Lets States Force Online Retailers to Collect Sales Tax

South Dakota v. Wayfair (argued April 17th, 2018): This is another Case that asks the Supreme Court to Overturn its longstanding Precedent, a 26-year-old Decision holding that the Constitution Prohibits the States from Imposing a Sales Tax on Out-of-State Retailers that do not have a Brick-and-Mortar Presence, Warehouse, or Sales Operation with Sales Representatives in the State. Two years ago, South Dakota Passed a Law that required Retailers to Collect Sales Taxes of 4.5% if they have at least Annually $100,000 in Sales or 200 Transactions in the State, even if they do not have a Store or Warehouse there.

The State argues that, with the Explosion of Sales made over the Internet, times have changed since the Court issued its Ruling in 1992, and the question whether a Retailer has a Connection to the State, a Key Issue in assessing the Constitutionality of the Tax, shouldn’t hinge on whether the Retailer has a Physical Presence there.

I took part in the 1992 Quill Case.

States have Broad Authority to Force Online Retailers to Collect potentially Billions of Dollars worth of Sales Taxes, the U.S. Supreme Court Ruled on Thursday, siding with South Dakota in its high-profile Fight with E-Commerce Companies.

The Justices, in a 5-4 ruling against Wayfair Inc(W.N), Overstock.com Inc(OSTK.O), and Newegg Inc, Overturned a 1992 Supreme Court Precedent in Quill that had Barred States from requiring Businesses with No "Physical Presence" in that State, like Out-of-State Online Retailers, to Collect Sales Taxes.

More than 40 States and the Trump Administration asked the Supreme Court to Overturn its 1992 Decision in Quill v. North Dakota.

Justice Anthony M. Kennedy, who wrote Thursday’s Majority Decision, had earlier called for the Court to Reconsider the Decision. Kennedy wrote that dramatic Technological Changes had made the Court’s previous Ruling Obsolete, and that it Unfairly Disadvantaged Traditional Brick and Mortar Stores. “A virtual showroom can show far more inventory, in far more detail, and with greater opportunities for consumer and seller interaction than might be possible for local stores,” Kennedy wrote.

“Yet the continuous and pervasive virtual presence of retailers today is, under Quill simply irrelevant. This court should not maintain a rule that ignores these substantial virtual connections to the state.” He was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel A. Alito Jr., and Neil M. Gorsuch.

Chief Justice John G. Roberts Jr. wrote the Dissent. He said the Court should not be doing the work of Congress, even if its earlier Precedents are open to Question. “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.

“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. The court should not act on this important question of current economic policy, solely to expiate a mistake it made over 50 years ago.”