Under South Dakota's law, online retailers with more than $100,000 in annual sales or more than 200 transactions in the state are required to pay a 4.5 percent sales tax on all purchases. Note that consumers who live in one of the five states without a sales tax...
The top court in the U.S. has ruled that states can force online companies to collect sales tax from their customers. In many states, individual consumers were the ones legally responsible for paying sales tax for purchases where they were not charged, but those laws were rarely, if ever, enforced.
"That has meant about $300 million in lost revenue every year, including $160 million for the state, $112 million for cities and $24 million for counties", Neal said. Indeed, Amazon had been in favor of online sales tax collection.
The online stores have contended that charging sales tax would be "burdensome" for small- to mid-sized shops.
Later, he concluded, "Concerns that complex state tax systems could be a burden on small business are answered in part by noting that, as discussed below, there are various plans already in place to simplify collection; and since in-state businesses pay the taxes as well, the risk of discrimination against out-of-state sellers is avoided".
Rauschenberger says the 1992 case allowed hundreds of millions of dollars in taxes to go uncollected, putting businesses in the state at a disadvantage.
Meanwhile, a statement release Thursday said the state Chamber was "very pleased" with the decision.
Retail trade groups praised the ruling, saying it levels the playing field for local and online businesses. This will be a huge boost to state budgets, but online retailers won't be pleased.
Sales tax is pretty interesting in the United States as it's done on a state-by-state basis.
Chief Justice John Roberts agrees. The lineup of justices on each side of the case was unusual, with Roberts joining three more liberal justices and Ginsburg joining her more conservative colleagues.
The cases the court overturned said that if a business was shipping a product to a state where it didn't have a physical presence such as a warehouse or office, it didn't have to collect the state's sales tax.
Quill was a catalog (not e-commerce) retailer that had no presence in North Dakota.
"If we would have passed Legislative Bill 44, we would have started collecting sales taxes 10 days from now", he said.
Shares of Amazon, Etsy, and eBay dropped after the ruling, though it's too early to tell if this will deter shoppers from purchasing online, which is unlikely considering how fast e-commerce is growing.
Retailers who own physical stores have been lobbying Congress for years to overturn the 1992 Quill decision by the Supreme Court.
The Illinois provision mirrors the South Dakota law at the center of the Supreme Court case, and is scheduled to go into effect on October 1. South Dakota took him up on the suggestion.