Our view: Tax Internet sales the same as ones at the mall

These are rough days for brick-andmortar stores. They spend a fortune on rent and staffing only to have customers order stuff online. If that weren’t enough, they have to charge their customers sales taxes while many Internet retailers do not.

Relief just might be on the way. On Tuesday, the Supreme Court heard arguments over a South Dakota law that would impose the same state sales tax on goods ordered online as those sold in stores.

“Whether an in-state shop, an outof-state shop, everybody is treated to the same tax collection obligation,” explained Justice Ruth Bader Ginsburg, an apparent supporter of allowing states to collect more taxes.

The South Dakota law was written to get the court to revisit its 1992 ruling that Internet retailers could be required to collect sales taxes only in states where they had a “physical presence,” such as a store or distribution center.

The idea that a vendor must have a physical presence in a state is bizarre on its face. A sales tax, like an income tax, is a tax on individuals. It is those individuals’ location, and not the location of the companies, that should be the determining factor.

The 1992 precedent, Quill Corp. v. North Dakota, was written partly on the assumption that Congress would step in to fix things. It has not, and shows no signs of doing so now. Many lawmakers reason that addressing the problem would be viewed as Congress hiking taxes — without Washington even getting the benefit of additional revenue.

That’s the reality the justices face. They created a precedent that undermines states and is wildly discriminatory. They can wait indefinitely for Congress to fix their creation. Or they can fix it themselves.

The most obvious discrimination in Quill is the harm done to brick-andmortar stores. Their travails are easy to see. But another, less obvious, one is illustrated in the fact that both Quill and Tuesday’s case, South Dakota v. Wayfair, come from the Dakotas.

States with small populations are hurt much more by the current system than large states, for the simple reason that retailers are more likely to have a physical presence in those larger states. The upshot is that large states can collect a significant portion of their revenue from sales taxes, while small states can not.

This is especially hard to fathom given the changes that have taken place in the past quarter-century. The Quill case was decided before Amazon even existed and the mail-order business was relatively small.

E-commerce is no longer struggling to get off the ground. It is a half-trillion dollar industry that is doubling in size every five or six years. Computer software can take the complexity out of sales tax collections.

What might have once seemed like deference to Congress now looks like a court-mandated national retail policy — one that is unfair, illogical and antiMain Street.