A Supreme Court Case Could Make Online Shoe Shopping More Expensive

A Supreme Court Case Could Make Online Shoe Shopping More Expensive

The counter argument is that it is very hard for retailers to maintain sales tax accounts in all states they ship to.

The case is especially timely since President Donald Trump has publicly blasted Amazon for not collecting sales taxes, even though it does so on its own sales. But other online sellers, from 1-800 Contacts to home goods site Wayfair, can often sidestep charging the tax.

That practice stems from a 1992 Supreme Court decision. In a friend-of-court brief, eBay says taxing internet sales would place "crushing burdens on small online businesses, causing many to curtail operations and damaging the national economy".

Large retailers want all businesses to "be playing by the same set of rules", said Deborah White, the president of the litigation arm of the Retail Industry Leaders Association, which represents more than 70 of America's largest retailers.

According to the Government Accountability Office, states could have collected an extra $13.7 billion in taxes in 2017 if online purchases were accounted for.

But South Dakota concluded in 2016 that the explosion in online sales changed the market drastically. Consumers must pay sales tax on the item at both the local Macy's department store or on Amazon, which sells the appliance out of its own stock for $39.95, plus $2.40 in tax.

South Dakota projects its revenue losses because of online sales that do not collect state taxes at around $50 million annually, while its opponents in the case estimate it as less than half that figure.

The companies also note that the largest internet retailer, Amazon.com, now pays sales taxes in all the 45 states that collect them.

More news: Bacteria and feces found in fake cosmetics similar to popular makeup brands

The Supreme Court will hear a case Tuesday on whether to tax online orders delivered to states where the business has no brick and mortar shop or warehouse.

E-commerce companies supporting Wayfair, Overstock and Newegg include two that provide online platforms for individuals to sell online: eBay Inc and Etsy Inc.

Kennedy said in 2015 that Quill had produced a "startling revenue shortfall" in many states, as well as "unfairness" to local retailers and their customers. The state is urging the court to let sales taxes be imposed on companies with an "economic presence" in a state - a test South Dakota says its law would pass.

On April 17, Tuesday, the U.S. Supreme Court will conduct oral arguments, and will decide whether it will retain or overturn a 26-year-old ruling related to catalog retailers. The state, conceding it could win only if the Supreme Court reverses course, has lost in lower courts.

South Dakota and its allies say "physical presence" is an increasingly elusive concept in the era of internet storefronts and smartphone apps. Although all collect taxes in other parts of the country - 25 states for Wayfair, eight for Overstock and six for Newegg - they've been able to skirt South Dakota because they don't have a physical presence there. In addition, they said, the court can write a ruling that "applies prospectively only for all retailers and taxpayers".

It's unclear how the justices might align on the question this time. Three current justices - Clarence Thomas, Anthony Kennedy and Neil Gorsuch - have already expressed doubts about the precedent. State legislators knew the measure was unlawful under the 1992 precedent.

Small retailers are not collecting state taxes from online shoppers unless the store has a physical presence in the state where the buyer lives.

Related Articles