Major U.S. Supreme Court Decision Allows States to Charge Sales Tax for Online Purchases

Yesterday the United States Supreme Court overruled decades of legal precedent governing taxation for online purchases. The decision, South Dakota v. Wayfair, Inc., No. 17-494 (June 21, 2018) changes the national standard on when an online business must collect and remit taxes under the states’ respective tax laws. Specifically, the Court ruled that an out-of-state seller’s “physical presence” is not necessary for the state to compel the company to collect and remit its sales tax, overruling prior cases on the matter (Quill Corp. v. North Dakota By and Through Heitkamp and National Bellas Hess, Inc. v. Department of Revenue of State of Ill.) In a typical retail transaction, states tax the retail sale of goods and services within their state. The sellers are generally required to collect and remit the sales tax to the state, but when they do not, the in-state customers must pay a “use tax” at the same rate (consumer compliance rates are…

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