Writing for the court, Justice Anthony Kennedy said the 1992 ruling, which involved catalog sales, was obsolete in the e-commerce era.
In recent years, Justice Kennedy has suggested, through various opinions and statements on the subject, that he had come to realize that the courts basically created a tax loophole for online companies, and that the court ruling was costing states billions in lost tax revenue.
Consumers can expect to see sales tax charged on more online purchases, likely over the next year and before the Christmas shopping season.
He also noted how one online retailer that does not collect taxes promotes the idea of "beautiful, peaceful homes."What Wayfair ignores in its subtle offer to assist in tax evasion is that creating a dream home assumes solvent state and local governments", he wrote". "Given the burgeoning presence of online, you can no longer treat this as being anything other than the mainstream swim of retail sales". These new laws will undoubtedly increase the time, money and effort that remote sellers must devote to state and local tax compliance, including registering as a vendor to collect sales and use tax in multiple states. All but five states impose sales taxes. "This court should not prevent states from collecting lawful taxes through a physical presence rule that can be satisfied only if there is an employee or a building in the state".
While the new sales tax laws may be seen as an effective way to generate more tax revenue, many small online retailers may struggle to keep up with the changes. "Nonprofit organizations that sell merchandise via the web will need to pay careful attention to state tax law developments following this decision", stated Mike Batts, managing partner of Batts Morrison Wales & Lee. Those retailers may face headaches complying with various state sales tax laws, though there are software options to help. Retailers are not in the business of law enforcement, and normally, while citizens are required to obey laws, they are not required to enforce them. South Dakota sued the company and eventually took its case to the Supreme Court.
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By overturning a ruling that had made much of the internet a tax-free zone, the court delivered a victory to South Dakota and effectively blessed its model of collecting sales tax from online retailers.
"This simplifies life for retailers and for consumers and it levels the playing field for retailers and their internet competitors", Karr said.
"When people find things in our store that they can't find in their own market, they order from us, and they pay the in sales tax", Siebert said.
About 16 states already have laws that will let them require tax collection by internet retailers in the coming months, and more could follow quickly. The Court's 1986 decision in Complete Auto departed from this rigid analysis, and held that a state may tax interstate commerce so long as the tax (1) applies to an activity with a substantial nexus with the taxing state, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related to the services the state provides.
As for the argument about the impact on smaller online merchants, Shearman said mom-and-pop stores are the ones that have been disadvantaged in the 26 years since Quill. The result is that sales tax rates can vary by city and county. In that case, Quill v. In dissent, Chief Justice John Roberts said Congress should be making this decision, not the courts. The law was a direct challenge to the Court's 1992 decision in Quill, requiring a physical presence.