Supreme Court finally is equalizing internet sales tax collection

The U.S. Supreme Court has imposed long-overdue parity on the world of internet commerce with its ruling Thursday that states can collect sales taxes from out-ofstate online merchants.

For far too long, internet retailers with no physical operations in, for example, California have been able to evade collecting and passing on sales tax for purchases made by state residents.

It’s grossly unfair to their brick-and-mortar competitors, who not only struggle under the weight of storefront rents but also are disadvantaged because their products cost up to 10 percent more when sales tax is added.

State officials have been studying the high court ruling and California law to determine whether they can immediately impose a tax requirement on out-of-state retailers or if they will first need action by the Legislature.

It appears that when state sales tax rules were last rewritten in 2011, lawmakers anticipated such a high court ruling.

It seems that Gov. Jerry Brown’s administration, which oversees the agency responsible for sales tax collection, could direct immediate implementation. If it can, it should.

For too many years, we’ve been hearing online retailers complain that collecting sales taxes would hinder expansion of internet commerce. That argument is outdated. Consumers no longer need the incentive of a no-sales-tax discount to consider shopping with their desktop computers or smartphones.

Similarly, we’ve heard the cry that small online retailers should get a break — an argument that is equally perplexing. There is no logical reason that small brick-andmortar companies, or small online companies located within the state, should be required to collect sales tax but fledgling out-of-state competitors should be exempt. Finally, some online merchants have whined that it’s too complicated to keep track of the different tax rates in state and local jurisdictions across the country.

Actually, internet companies such as Amazon, which already collects sales tax for products sold across state lines (but not for third-party sellers that appear on its website), has demonstrated that the problem is easily resolved.

Enterprising companies will undoubtedly come up with competing products to fill the need, just as TurboTax and H&R Block have done for income tax payers for years now. The same technology innovation that brought us internet commerce can certainly also smooth the path for tax collection.

It’s time for California to fully level the playing field, which could bring the state $1 billion or more in additional tax revenues. And, thanks to the Supreme Court ruling, there seems to be no legal obstacle to doing so.

The 5-4 ruling crossed philosophical lines on the high court, with Justices Anthony Kennedy, Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito and Neil Gorsuch forming the majority.

Their decision came in a case pertaining to South Dakota’s attempt to collect taxes from out-of-state businesses. The justices reversed a 1992 high court ruling that prohibited states from collecting sales taxes from businesses that had no stores, warehouses or other “physical presence” there.

Kennedy and Thomas, who were on the court in 1992, said they regretted the earlier ruling.

“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States,” Kennedy wrote for the majority.

We couldn’t agree more. It’s about time.