Detail

Supreme Court Rules States Can Collect Sales Tax from Online Retailers; Uniform Collection Standards Present Significant Challenge

  • June 22, 2018

The Supreme Court yesterday ruled 5-4 in South Dakota v. Wayfair to expand States' authority to collect sales and use taxes on Internet consumer purchases from retailers who do not have a physical presence in a state. 

The Supreme Court yesterday ruled 5-4 in South Dakota v. Wayfair to expand States' authority to collect sales and use taxes on Internet consumer purchases from retailers who do not have a physical presence in a state.

  • Real Estate Roundtable President and Chief Executive Officer Jeffrey DeBoer commended the Court's long-anticipated ruling.  He noted the decision "rejects an antiquated 'physical presence' standard. That test exempted on-line retailers from collecting sales and use taxes – yet imposed those obligations on traditional 'brick-and-mortar' retailers.  DeBoer also noted the ruling "will enable states to collect much-needed revenue to provide public services and invest in local infrastructure projects."  (Roundtable Statement, June 21)
  • The Roundtable on March 5, 2018 joined The International Council of Shopping Centers (ICSC), Investment Program Association, Nareit®, the National Association of REALTORS® , the National Multifamily Housing Council, NAIOP, the American Farm Bureau Federation and the South Dakota Farm Bureau Federation in filing an amicus curiae brief.  (Roundtable Weekly, March 9) 
  • While the Wayfair decision overturns previous case law, it also creates the potential for a patchwork of state-level collect and remit statutes, which may lead to efforts by Congress to simplify States' tax collection practices. 
  • Justice Anthony Kennedy wrote in the majority opinion: "Eventually, software that is available at a reasonable cost may make it easier for small businesses to cope with these problems. Indeed, as the physical presence rule no longer controls, those systems may well become available in a short period of time, either from private providers or from state taxing agencies themselves. And in all events, Congress may legislate to address these problems if it deems it necessary and fit to do so." (Supreme Court opinionSouth Dakota vs. Wayfair
  • In the dissent, Chief Justice John Roberts reflected his belief that the decision could preclude a federal solution from Congress: "Armed with today's decision, state officials can be expected to redirect their attention from working with Congress on a national solution, to securing new tax revenue from remote retailers." (Supreme Court opinionSouth Dakota vs. Wayfair

ICSC President and Chief Executive Officer Tom McGee said, "We understand this is a major step in a long process, but look forward to working with policymakers and business owners to find state-level legislative solutions which promote fairness and competition." (CoStar News, June 21) 

The Roundable's DeBoer added, "We stand ready to assist policymakers should they respond to today's decision with legislation that provides our nation's businesses with fair standards to collect the tax that is owed on online sales."  (Roundtable Statement, June 21)