A very interesting test case played out before the U.S. Supreme Court Tuesday and the decision expected to be handed down in June could impact everyone who shops online.
A suit brought against three large online retailers by South Dakota asks the court to require businesses that do more than $100,000 in annual sales online to pay the state’s 4.5 percent sales tax.
At the conclusion of the arguments, the justices seemed split, according to news sources.
Three justices -- Anthony Kennedy, Neil Gorsuch and Clarence Thomas --stated publicly they would overturn a 1992 ruling, known as Quill v. North Dakota.
The Quill ruling opened the door for online shopping by making it possible for people to purchase goods without having to pay sales tax on the merchandise.
While the Quill ruling benefited online retailers, it hurt local businesses that still had to collect sales tax.
This isn’t the first time I have weighed in on the sales tax debate. I wrote many years ago that the Quill ruling put traditional retailers at a great disadvantage and robbed states of sales tax income.
Justice Ruth Bader Ginsburg may have stated my position best.
“Anyone who wants to sell in-state, whether an in-state shop, an out-of-state shop, everybody is treated to the same tax collection obligation,” she said.
Admittedly, requiring online retailers to collect sales tax could create a nightmarish scenario. Every state has different tax rates. Many cities, like Myrtle Beach, impose their own sales tax. Even some airports have their own taxing jurisdiction.
Keeping up with the multitude of taxing authorities could put a tremendous burden on online retailers. Many online retailers sell to every state in the nation. Remitting the correct sales tax during the correct reporting period presents a daunting challenge.
Nevertheless, I’m sure the smart guys that figured out how to turn the Internet into a financial juggernaut can create software capable of sorting out the various sales tax requirements.
Some of the Supreme Court justices thought the whole issue of online sales tax should be a matter for Congress to settle. They must have more faith in Congress than I do.
No, the decision needs to come from the Supreme Court and the sooner the better.
Do I want to pay sales tax for the things I buy on the Internet?
But I do think it’s the right thing to do.
So many small businesses are struggling to survive in today’s hyper-competitive market. Our local retailers are the ones that help pay for our schools, our government and the services we enjoy as a society.
I don’t think it is fair to make them tack on a sales tax to their customers when the online retailers get a free pass. I hope the Supreme Court sees things from a fairness standpoint.