June 22, 2018

Written by Christina Anderson & Doug Hermanson

In a decision that may open the door for more states to tax online purchases, the U.S. Supreme Court ruled 5-4 yesterday that South Dakota can mandate that Wayfair collect sales tax, even though the retailer does not have any warehouses or employees in the state. In the ruling’s immediate aftermath, the stock prices of Wayfair and other top online retailers, including Amazon and eBay, dipped. However, the actual impacts of the ruling are more nuanced.

The previous court decision that set the property or employees standard for sales taxes went into effect in 1992, when eCommerce was in its infancy. As eCommerce grew, 31 states implemented complex laws to tax Internet sales, according to the Tax Foundation. Yesterday’s decision validates a new and simpler way for states to force online retailers to collect sales taxes. It may eventually push Congress to pass federal legislation that would supersede the patchwork of state laws burdening online retailers.

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