US Supreme Court paves way for states to hit online merchants with sales taxes
The US Supreme Court opened the door for states to collect sales taxes on products purchased by residents from Internet retailers in other states on Thursday.
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In a 5-4 decision, the Supreme Court threw out a previous ruling that dated back the era of the mail-order catalogue Quill that limited states' ability to collect sales taxes from vendors that did not have a physical presence in that state.
Expectations are that the court's long-awaited decision in a dispute between the state of South Dakota and Boston-based online retailer Wayfair, along with two other online sellers, Overstock.com and Newegg, will have a far-reaching effect on billions of dollars-worth of goods sold online.
Justice Anthony Kennedy ruled the 1992 Quill decision was flawed and outdated due to advances in technology and changes in commerce.
"Modern e-commerce does not align analytically with a test that relies on the sort of physical presence defined in Quill," Kennedy wrote.
"For example, a company with a website accessible in South Dakota may be said to have a physical presence in the State via the customers' computers," she added.
Amazon shares dipped 1.3% after the Supreme Court ruling, despite the firm already collecting sales taxes for its own goods in all 45 states that have such a tax, plus the District of Columbia.
The e-commerce giant has succesfully dropped its sales tax exposure over recent years by greatly expanding the number of distribution centers, warehouses and data centers it operates across the US.