Over the last several years, state and local governments have been very vocal about their desire to collect sales taxes from online purchases. Today, the Supreme Court voted in their favor.
In a 5-4 vote, the Supreme Court overturned two long-standing decisions that restricted states from being able to collect sales taxes from online shoppers.
The decisions that were in place made it hard to collect a tax on some purchases. More than 40 states petitioned the Supreme Court to change the rules.
As Justice Anthony Kennedy explained, the previous decisions were harming states and needed to be corrected.
“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States,” Kennedy stated in an opinion along with by Justices Ruth Bader Ginsburg, Clarence Thomas, Samuel Alito and Neil Gorsuch. According to Kennedy, “The rule “limited States’ ability to seek long-term prosperity and has prevented market participants from competing on an even playing field.”
Moving forward, states can force out of state sellers to collect a tax and send it to the state.
The ruling, it should be noted, is expected to benefit large retailers that have brick-and-mortar locations and are already collecting sales taxes from online shoppers.
According to the National Retail Federation, though, federal legislation will be required to provide clarification about the new vote.
“E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule. Any alteration to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress,” explained Chief Justice John Roberts, in a joint statement along with Justices Elena Kagan, Stephen Breyer and Sonia Sotomayor.