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Supreme Court considers future of online sales tax

BY Deena M. Amato-McCoy

As the U.S. Supreme Court evaluates whether online retailers should collect sales taxes, industry groups continue to urge the court to overturn the tax break adopted in the pre-Internet era.

On Tuesday, the court heard oral arguments on a 2016 South Dakota law that requires online merchants with more than $100,000 in sales to state residents, or 200 transactions with state residents, to collect sales tax. The law was struck down last year by South Dakota’s highest court, which cited the Supreme Court’s 1992 Quill Corp. v. North Dakota decision. In that case, the justices said online sellers can only be required to collect sales tax in states where they have a physical presence such as a store, office or warehouse. Part of their reasoning was that there were more than 6,000 state and local sales tax jurisdictions across the country and that the regulations were too complex for a seller to know how much to collect unless they were doing business locally.

The Hill reported that the justices seemed to grasping for answers on how to resolve the dispute, with no clear indication on how they will rule.

The nation’s retail associations are calling for a level playing field, “where everyone competes under the same rules,” said Matthew Shay, president and CEO of the National Retail Federation.

“It’s time for the Supreme Court to clear the way for modern sales tax policy that will finally put all channels of retail – from stores to online – on a level playing field where everyone competes under the same rules,” Shay said. “Online sellers who don’t have to collect sales tax have held an unfair price advantage over local retailers for far too long.”

The Retail Industry Leaders Association (RILA) said retailers are hopeful that the Court will acknowledge the dramatic changes in technology and commerce over the past 20 years. Reversing the decision could pave the way for states to require all retailers play by the same rules and collect sales taxes.

“Main Street retailers deserve a level playing field upon which to compete, and the case today before the U.S. Supreme Court may finally get us there,” said Brian Dodge, senior executive VP for public affairs with RILA.

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