Our view: Tax ruling is a win for Main Street and common sense

Since the dawn of the internet, online buyers have caught a break. While most states collect a sales tax on items bought in stores, they have been precluded in many cases from collecting the same tax from online retailers.

That disparity might seem like a good deal for consumers, but it has been a significant factor in the decline of brick-and-mortar retailing. Not only that, it offends logic.

Now, after years of hemming and hawing, the Supreme Court has finally restored equity between online and inperson purchases. In a 5-4 ruling on Thursday that cut across ideological lines, the court effectively said states are free to collect sales taxes on internet sales, just as they do on store sales.

The decision breaks starkly with precedent, overturning rulings from 1967 and 1992 that hold taxes can be collected only in cases when the vendor has a physical presence within a state. But it comes down strongly on the side of common sense.

Even the dissent written by Chief Justice John Roberts (and joined by three of the court’s Democratic appointees) acknowledged that the prior rulings were wrongly decided. But if those precedents are to be discarded, Roberts said, it should be Congress that does the discarding.

The basic principle here, known as stare decisis, is not without its merits. But in this case, it seems odd for the chief justice to so clearly admit an error, and so transparently ask Congress for help, without conceding that the court could simply correct the error itself.

The majority ruling’s impact could be seen in stock prices. Most large brick-and-mortar retailers, such as Walmart and Home Depot, were up on Thursday. Internet retailers were down a little, or a lot, based on how extensively they voluntarily comply with state tax laws.

The ruling’s big winners were the states, and small retailers with minimal internet presence. For the sin of providing a useful service and being, in many cases, pillars of their communities, they had been put at a competitive disadvantage by prior court rulings.

Now, on a level playing field, they will be less likely to see customers check out their wares only to leave the store and order online. Their local economies will get a boost from their increased business. Their state and local governments will collect more in taxes that they can use to pave roads, pay off debts, or cut other taxes.

Congress once thought that e-commerce was a fragile, fledgling enterprise that needed special tax treatment to sustain it. Now that it is a massive and rapidly growing business, that argument falls apart.

The Supreme Court once thought it was too much of a burden for online retailers to comply with tax-code differences from one jurisdiction to another. Now it’s a simple task for software.

The justices’ decision is a case of law catching up with reality.