South Dakota then filed a lawsuit to declare that the new law was valid, a suit that eventually found its way to the Supreme Court.
On Thursday, the Supreme Court agreed to overturn those decisions in a 5-4 ruling.
For this case, South Dakota v Wayfair Inc., Justice Ruth Bader Ginsburg joined Justices Samuel Alito, Neil Gorsuch, Anthony Kennedy, and Clarence Thomas to deliver the majority opinion.
Anyway, that's that. Within a year or less, every state will collect sales tax on internet and mail-order sales. So it passed a law requiring all but the smallest retailers, including Internet companies, to collect taxes on the sales they make in the state, even if they had no physical presence there.
The ruling opens the door for some New Hampshire-based retailers to be forced to collect sales tax from online customers living in other states. The law required out-of-state sellers who do more than $100,000 of business in the state or more than 200 transactions annually with state residents to collect sales tax and turn it over to the state.
Amazon has been collecting sales taxes in all states that have the tax since April 2017 and in many states - including Texas - much earlier.
But sellers that only have a physical presence in a single state or a few states could avoid charging customers sales tax when they're shipping to addresses outside those states. Amazon already taxes items from its own warehouses. The conservative chief justice, John Roberts dissented along with liberals Stephen Breyer, Sonia Sotomayor and Elena Kagan. Sellers who use eBay and Etsy, which provide platforms for smaller sellers, also haven't been collecting sales tax nationwide. His administration wrote a brief in defense of South Dakota's position and the president has taken issue with Amazon's tax collection policies over Twitter.
In response to the ruling, the stocks of several internet retailers, including Amazon, eBay and Wayfair, all dropped.