US Supreme Court hearing case about online sales tax collection

Packages from Internet retailers are delivered on Friday

But states say software has now made collecting sales tax easy. The answer right now is: It depends.

Amazon, which is not involved in the Supreme Court case, collects sales taxes on direct purchases on its site but does not collect taxes for items sold on its platform by third-party venders, amounting to about half of total sales.

"Although online businesses may not have a physical presence in some states, the Web has, in many ways, brought the average American closer to most major retailers", he wrote in suggesting the days of inconsistent sales tax collection may be numbered. In Quill, the Supreme Court reaffirmed that the dormant commerce clause prohibits a state from requiring an out-of-state retailer to collect and remit a state sales tax if the retailer has no physical presence there. Roberts anxious that requiring people who run their own websites to collect sales taxes for an estimated 12,000 taxing jurisdictions across the nation would be overly burdensome.

But South Dakota and 41 other states, including California, are urging the court to overturn the "physical presence" rule.

Large retailers such as Apple, Macy's, Target and Walmart, which have brick-and-mortar stores nationwide, generally collect sales tax from their customers who buy online.

Q: How does this affect states?

Many states, though not all, impose a sales or use tax on the sale of goods or services. But states have found that only about 1 percent to 2 percent actually pay. States say their losses mean cuts to critical government programs and that those losses compound as online shopping grows.

Justice Elena Kagan said that it might be better if the Supreme court did not rule on the case because it could be better decided by the legislature: "Congress is capable of crafting compromises".

For years, the internet sales tax collection issue for states was largely about online giant Amazon.com, which didn't collect sales tax in every state.

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. Taxes can even vary within a zip code.

In 1992, the justices ruled the Constitution bars a state from requiring a catalog seller in, say, ME from collecting the sales taxes owed by a shopper in California.

That same year, South Dakota followed Justice Kennedy's suggestion by passing a law that would require any retailer transacting more than $100,000 in business in South Dakota or making more than 200 sales to consumers there to collect and remit the South Dakota sales tax; it didn't matter, according to the new law, whether the retailer had a physical presence in the state.

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