States can now force you to pay online sales tax

The Supreme Court rules against Wayfair and other online retailers and overturns ban on the collection of online sales taxes. Jenny Kane  AP

The Supreme Court rules against Wayfair and other online retailers and overturns ban on the collection of online sales taxes. Jenny Kane AP

The 5-4 decision defied the usual conservative-liberal lineup with Kennedy joined by liberal Justice Ruth Bader Ginsberg, and conservatives Samuel Alito, Neil Gorsuch and Clarence Thomas.

Last year, states could have collected as much as $13.4 billion in additional online sales taxes, according to the General Accountability Office. But retailers with stores in the state, which do have to collect sales taxes, have long argued that the ruling put them at a competitive disadvantage with companies like Amazon. This ruling could help clear away any legal objections to taxes like Chicago's Netflix tax.

North Dakota from 1992, which set the property or employees standard for sales taxes using the Court's (debated) dormant commerce clause power to restrict state taxation of interstate commerce.

Supreme Court Justice Anthony M. Kennedy agreed in the majority opinion, finding that 25-year-old rule "prevented market participants from competing on an even playing field".

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The previous law resulted in some companies not collecting sales tax on every online purchase. 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.

Each state has a complex sales tax system, which was cited in the 1992 Quill case as a reason against requiring businesses to collect the dues in states where they had no physical presence.

Thursday's ruling involves a dispute between the state of South Dakota and Boston-based Wayfair Inc., along with other two other online sellers, Overstock.com Inc. and Newegg Inc.

After states and traditional retailers have grumbled about this situation for years, South Dakota finally chose to do something to change it. They said local tax laws vary widely across the nation and calculating sales taxes for 10,000 local taxing jurisdictions remains a daunting task.

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