Supreme Court Rules for States on Internet Sales Taxes

The Story:

The U.S. Supreme Court, on Thursday, June 21, ruled that states have the authority to collect sales taxes from the merchant on internet sales even when the retailer has no “physical presence” (no brick-and-mortar store or warehouse) in the state where the purchase is made.

The Background:

Back in 1992, in a case involving mail order catalogs, the court had ruled that states do not have this authority in the absence of physical presence. The “World Wide Web” had been formally launched only a year before, and no one at the time of the QUILL case was thinking of the wave of online merchants soon to wash up upon the shores of retailing.

But QUILL has given a built-in price advantage to those online merchants, and companies that have continued to sell at brick and mortar outlets have resented it.

The Thing to Know:

The WAYFAIR case overturns QUILL. This doesn’t mean that the internet tax advantage will immediately disappear, but it does mean that the legislature of many of the individual states will likely begin their deliberations on whether they will use their re-affirmed sovereignty to increase revenue from this quarter.

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