Battle over sales taxes on online purchases heads to Supreme Court

Packages from Internet retailers are delivered on Friday

Packages from Internet retailers are delivered on Friday to an apartment building in Washington

Wayfair Inc. essentially pits the 45 states that impose a sales tax against the handful that don't.

Initially meant to regulate catalog-based sellers, the ruling has been challenged again and again by states seeking to claim their fair shake of online sales.

But many other smaller retailers don't collect sales tax unless they have a physical presence in the state where the buyer lives, relying on a 26-year old Supreme Court decision that was related to catalog retailers.

Times and technology have changed.

Based on a prevailing Supreme Court law, retailers can be forced to collect taxes only in states where the company has physical presence.

But numerous sales these small retailers get are through bigger sites like Amazon and Walmart. Even retail companies without a physical store in South Dakota were required to follow the state law. Amazon collects sales tax on its own products, but not on other businesses' products that are sold through its website.

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While Harlingen has consistently posted positive numbers over the past two years, strong showings again by McAllen and Brownsville indicate retail sales in those cities seem to be rebounding after a long slump. It's an issue that brick-and-mortar retailers insist will provide a level playing field with online competitors, and help to provide state and local governments with the tax revenue they deserve.

Online retailers said reversing the 1992 precedent is a negative move in terms of e-commerce.

"Online retailers are omnipresent today - on consumers" smart phones, laptops, tablets, and computers - in a way that was inconceivable in 1967 or 199", she continued.

The counter argument is that it is very hard for retailers to maintain sales tax accounts in all states they ship to. "For small businesses on tight margins, these costs are going to be fatal in many cases", Andy Pincus, who filed a brief on behalf of eBay and small businesses that use its platform, told the Associated Press. The court will also rule whether states have the authority to tax all online purchases.

A decision on the case by the U.S. Supreme Court is expected to be announced in June.

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