Supreme Court to Consider Sales Tax for Online Shopping

Under existing law, the 45 states that charge sales taxes are not allowed to order retailers to enforce the collection of these taxes on many of the goods and services that cross state lines. In a 1992 federal Supreme Court decision, Quill v. North Dakota, the Supreme Court attached a strict condition upon state attempts to use retailers to charge these sales taxes. The state must present evidence that the retailer has a physical presence, called by lawyers a “nexus,” within the state that seeks to use the retailer to charge the sales tax.

One of the core arguments set forth in Quill is that the Constitution forbids the states from charging a tax on interstate commerce and that any transaction that lacks a nexus is a pure interstate transaction that falls within the guidelines set forth in this prohibition. Furthermore, mail-order firms at the time of Quill argued convincingly that it would be unreasonably burdensome for them to keep up with sales tax laws in all U.S. jurisdictions in which sales taxes are charged. In Illinois, a multitude of sales tax rates are charged by different counties and municipalities.

With the coming of the Internet age, an increasing number of goods shipments cross state lines after being ordered through electronic means. In addition, automation has made it possible for each retailer to know what the tax rates are in each jurisdiction to which they can ship their products, decreasing the burden upon retailers that affected the Quill decision. Furthermore, some legal scholars now assert that when a customer sees a product depicted on a screen and pushes a button to buy it, the acts of seeing the product and pushing the button all take place within one state and the transaction is no longer a purely interstate transaction that is protected from one-state taxation by the language of the Constitution. The state of South Dakota has begun to assert what it says is its right to enforce the charging of sales taxes on products shipped into their state by customer order, and the legal question has been packaged as a case for federal Supreme Court review. The name of the case is South Dakota v. Wayfair, which is being closely watched ahead of its scheduled oral arguments before the high court in April 2018.

No comments :