More than 40 states had asked the high court to overrule two, decades-old Supreme Court decisions that they said cost them billions of dollars in lost revenue annually. That was before the surge of online sales, and states have been trying since then to find constitutional ways to collect tax revenue from remote sellers into their state.
This overturned two Supreme Court rulings: 1967's National Bellas Hess, Inc. v. Department of Revenue of IL and 1991's Quill Corporation v. North Dakota from 1992, which set the property or employees standard for sales taxes using the Court's (debated) dormant commerce clause power to restrict state taxation of interstate commerce. He was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel A. Alito Jr. and Neil M. Gorsuch.
"When the day-to-day functions of marketing and distribution in the modern economy are considered, it is all the more evident that the physical presence rule is artificial in its entirety", Justice Anthony Kennedy wrote.
While this ruling is beneficial to state governments, it stands to have a negative impact on retailers and consumers alike. It's likely to negate some of the price advantages that come from buying online, as you might guess, but there's also the possibility of creating headaches for smaller e-commerce outfits that might lose a price advantage over heavyweights already paying state sales taxes. That's because they typically have a physical store in whatever state the purchase is being shipped to.
Only five states do not have a state-wide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Online sellers that haven't been charging sales tax on goods shipped to every state range from jewelry website Blue Nile to pet products site Chewy.com to clothing retailer L.L. Bean.
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A coalition of small business owners, many offering their online goods from home offices, say their profits would evaporate if forced to comply with complex tax rules in all 50 states. Chief Justice John Roberts wrote a dissenting opinion.
Lower courts ruled against the state's law, following the physical presence precedent.
The Trump administration had encouraged the Supreme Court to overturn the previous rulings and allow South Dakota to collect the sales tax.
Chicago was one of the first areas to impose a so-called Netflix tax but other states and towns have started to tax streaming and video services.