Supreme Court Decides States Can Tax Internet Sales

Washington, D.C. — The U.S. Supreme Court ruled on South Dakota vs. Wayfair on Thursday, June 21, effectively ending the protections of Quill vs. North Dakota that allowed tax free e-commerce and catalog sales.

Under the ruling, states can now decide whether or not they will tax internet sales. Many states have a de minimis rule that exempts out-of-state retailers below a certain dollar amount of sales (usually between $100,000 and $500,000) that will exempt smaller online retailers from the rule, but many states are expected to pass taxation rules in the wake of the ruling. The rule helps put online sales on equal footing with brick-and-mortar sales. However, for online retailers, it adds a cost burden of collecting, reporting and submitting sales tax, a process that large omnichannel retailers are already familiar with.

Last year, the Government Accounting Office estimated that state and local governments were losing between $8 billion and $13.4 billion annually in uncollected taxes for online sales, according to a retail industry alert produced by Atlanta law firm Arnall Golden Gregory.

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