Court to hear case that may cost on­line shop­pers

Sun Sentinel Broward Edition - - NEWS - By Jes­sica Gresko As­so­ci­ated Press

WASH­ING­TON — Sales Tax: $0.

On­line shop­pers have got­ten used to see­ing that line on check­out screens be­fore they click “pur­chase.” But a case be­fore the Supreme Court could change that.

At is­sue is a rule stem­ming from two decades-old Supreme Court cases: If a busi­ness is ship­ping to a state where it doesn’t have an of­fice, ware­house or other phys­i­cal pres­ence, it doesn’t have to col­lect the state’s sales tax.

That means large re­tail­ers such as Apple, Macy’s, Tar­get and Wal­mart, which have brick-and-mor­tar stores na­tion­wide, gen­er­ally col­lect sales tax from cus­tomers who buy from them on­line. But other on­line sell­ers, from 1-800 Con­tacts to home goods site Way­fair, can often side­step charg­ing the tax.

More than 40 states are ask­ing the Supreme Court to re­con­sider that rule in a case be­ing ar­gued Tues­day. They say they’re los­ing out on “bil­lions of dol­lars in tax rev­enue each year, re­quir­ing cuts to crit­i­cal gov­ern­ment pro­grams” and that their losses com­pound as on­line shop­ping grows. But small busi­nesses that sell on­line say the com­plex­ity and ex­pense of col­lect­ing taxes na­tion­wide could drive them out of busi­ness.

Large re­tail­ers want all busi­nesses to “be play­ing by the same set of rules,” said Deb­o­rah White, pres­i­dent of the lit­i­ga­tion arm of the Re­tail In­dus­try Lead­ers As­so­ci­a­tion, which rep­re­sents more than 70 large re­tail­ers.

For years, the is­sue of whether out-of-state sell­ers should col­lect sales tax had to do mostly with one com­pany: Ama­ The on­line gi­ant is said to ac­count for more than 40 per­cent of U.S. on­line re­tail sales. But as Ama­zon has grown, dot­ting the coun­try with ware­houses, it has had to charge sales tax in more and more places.

Pres­i­dent Don­ald Trump has slammed the com­pany, ac­cus­ing it of pay­ing “lit­tle or no taxes” to state and lo­cal gov­ern­ments. But since 2017, Ama­zon has been col­lect­ing sales tax in ev­ery state that charges it. Third-party sell­ers that use Ama­zon to sell prod­ucts make their own tax-col­lec­tion de­ci­sions, how­ever.

The case now be­fore the Supreme Court could af­fect those third-party Ama­zon sell­ers and many other sell­ers that don’t col­lect taxes in all states — sell­ers such as jew­elry web­site Blue Nile and in­ter­net re­tailer Over­ Sell­ers on eBay and Etsy, which pro­vide plat­forms for smaller sell­ers, also don’t col­lect sales tax na­tion­wide.

States gen­er­ally re­quire con­sumers who weren’t charged sales tax on a pur­chase to pay it them­selves, often through sel­f­re­port­ing on their in­come tax re­turns. But states have found that only about 1 per­cent to 2 per­cent ac­tu­ally pay.

States would cap­ture more of that tax if out-of­s­tate sell­ers had to col­lect it, and states say soft­ware has made sales tax col­lec­tion sim­ple.

Out-of-state sell­ers dis­agree, call­ing it costly and ex­traor­di­nar­ily com­plex, with tax rates and rules that vary not only by state but also by city and county.

The case now be­fore the Supreme Court in­volves South Dakota, which has no in­come tax and re­lies heav­ily on sales tax for rev­enue. South Dakota’s gov­er­nor has said the state loses out on an es­ti­mated $50 mil­lion a year in sales tax that doesn’t get col­lected by out-of-state sell­ers.

In 2016 the state passed a law re­quir­ing those sell­ers to col­lect taxes on sales into the state, a law chal­leng­ing the Supreme Court prece­dents. The state, con­ced­ing it could win only if the Supreme Court re­verses course, has lost in lower courts.

The court adopted its phys­i­cal pres­ence rule on sales tax col­lec­tion in a 1967 case deal­ing with a cat­a­log re­tailer. The court reaf­firmed that rul­ing in 1992. Jus­tices Neil Gor­such, Clarence Thomas and An­thony Kennedy have sug­gested a will­ing­ness to re­think those de­ci­sions.


As on­line shop­ping grows, many states say they’re los­ing out on “bil­lions of dol­lars in tax rev­enue” each year.

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