The matter reached the Supreme Court after South Dakota in 2016 passed a law requiring out-of-state sellers to collect and remit sales taxes, provided the total sales exceeded $100,000 or at least 200 transactions.
The court chose to overturn a 1992 decision that a physical presence was necessary to require retailers to collect and send sales taxes to a state.
"This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store, or both", Matthew Shay, federation president and CEO, said in a statement.
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Any near-term confusion would likely peter out as customers get used to the change, but it will likely be a bigger deal for other only-online stores like Etsy, Ebay, and Overstock. Meanwhile, Amazon's expansive operations meant it was already charging sales tax nearly everywhere.
- A Supreme Court ruling is making shopping on the internet more expensive.
South Dakota was backed by 35 states in the case, each of which filed an amicus brief in support of online sales tax.
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Recent attempts at the Roundhouse to impose the state's gross receipts tax on internet vendors have failed - one proposal was line-item vetoed by Gov. Susana Martinez previous year - but lawmakers from both political parties have described the measure as a fairness issue that could help local businesses. South Dakota took the case to the Supreme Court after Justice Anthony M. Kennedy, who wrote Thursday's majority decision, had made comments indicating it was time to revisit the issue, which the court previously ruled on in the 1992 Quill v.
The majority of USA states collect some sales tax on retail purchases, typically charging customers between 4% and 8% for each transaction.
"As Amazon has continued to thrive despite losing the obvious pricing benefit it used to have from not collecting sales taxes in its proprietary business, it remains to be seen if this new ruling will have any real impact on its third-party sales, or if the convenience for shoppers and growing benefits to Prime members will mitigate the pricing shift", he said. Those retailers may face headaches complying with various state sales tax laws, though there are software options to help.
"The physical presence rule has always been criticized as giving out-of-state sellers an advantage", the ruling says. Amazon was down almost two percent, although Amazon may be one of the least-affected retailers.
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On June 4, the last day of the special second session, Louisiana legislators rushed through a bill that used the same wording as a South Dakota law that was the subject to the constitutional challenge in the high court. Before this ruling, Amazon, for example, collected sales tax only from customers in Washington and Pennsylvania.