Florida retailers cheer Supreme Court online sales tax decision

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The US Supreme Court. Jim Watson AFP Getty Images

The former system was a competitive disadvantage to brick-and-mortar stores.

The decision was a victory for South Dakota, which, like some other states, has no income tax and relies on sales taxes to fund most of the state's services. Now governments will be able to collect billions of dollars in local sales tax. That decision established that online retailers only had to collect the state sales tax in states where they had a physical presence.

Many online companies and the five states without a sales tax, including New Hampshire, argued that it would be unfair to impose such a burden.

The decision came on a South Dakota suit against Wayfair.com, with the state claiming the company should collect sales taxes on sales in the state.

Bloomberg reported that the stocks of Amazon, Wayfair, Etsy, and eBay all fell following the ruling.

The news sent Amazon's share price tumbling. The cases the court overturned said that if a business was shipping a customer's purchase to a state where the business didn't have a physical presence such as a warehouse or office, the business didn't have to collect the state's sales tax.

Brick-and-mortar retailers in states are required to collect taxes on a state's behalf.

"The physical presence rule of Quill is unsound and incorrect", Kennedy wrote. 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. Kennedy wrote that the rule "limited States' ability to seek long-term prosperity and has prevented market participants from competing on an even playing field".

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Roberts, in dissent, said e-commerce has exploded in the United States in part because there have been uniform rules. She recalled Thursday that she started looking at this issue in 1992, when the Supreme Court in Quill v. Heitkamp suggested that states follow South Dakota's lead and enact laws tailored not to target small businesses.

Stare decisis can no longer support the Court's prohibition of a valid exercise of the States' sovereign power. "That should be a message to the states", Heitkamp told Reuters.

Online shopping nationwide and in SC has surged - thanks to the internet's availability - as more shoppers buy goods online instead of driving to stores.

That said, South Dakota's tax system includes several features that appear created to prevent discrimination against or undue burdens upon interstate commerce. Congress could also intervene to set a nationwide standard.

"You will certainly see, absent congressional action, significant litigation as states try to push the envelope on this", said Mike Dabbs, eBay's senior director of government relations.

In a concurring opinion, Justice Clarence Thomas said that after ruling for the retailer in 1992, he had changed his mind.

"Distortions caused by the desire of businesses to avoid tax collection mean that the market may now lack storefronts, distribution points, and employment centers that otherwise would be efficient or desirable".

"Startups and small businesses may benefit from the physical presence rule, but here South Dakota affords small merchants a reasonable degree of protection", the ruling says.

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