The Supreme Court agreed Friday to wade into the issue of sales tax collection on internet purchases in a case that could force consumers to pay more for certain purchases and allow states to recoup what they say is billions in lost revenue annually.
Under previous Supreme Court rulings, when internet retailers don’t have a physical presence in a state, they can’t be forced to collect sales tax on sales into that state.
A total of 36 states and the District of Columbia had asked the high court take up the issue. In a brief filed with the court, states wrote, “As the volume of Internet-based retail transactions continues to compound daily, the physical-presence rule exacts an ever-increasing toll on the States’ fiscal health.”
The states said that according to one estimate they’ll lose out on $211 billion in tax revenue over the next five years if the Supreme Court’s previous rulings stand.
Consumers who purchase from out-of-state retailers are generally supposed to pay the state taxes themselves, but few do.
The case the Supreme Court agreed to hear Friday comes from South Dakota, which has no state income tax and relies on retail sales and use taxes for revenue. In 2016, South Dakota lawmakers passed a law requiring out-of-state sellers like Overstock.com and home goods company Wayfair to collect and turn over sales tax to the state. The state’s highest court struck down the law, citing previous Supreme Court decisions.
In asking the Supreme Court not to take the case, Overstock.com, Wayfair and electronics retailer Newegg told the court that the largest online sellers, including Amazon.com, collect sales tax in every state that has a sales tax. And they said Congress is working on legislation that would address the issue.
House Judiciary Chairman Robert Goodlatte, R-Va., a sponsor of legislation to address the issue, was one of several members of Congress who asked the Supreme Court to decline to hear the case.
The Supreme Court will probably hear arguments in the case in April.