Federal Spotlight: Supreme Court to Review Internet Sales Tax Case

January 18, 2018

The United States Supreme Court has decided to take up a case that will revisit whether states can collect sales tax from online purchases. The court will hear arguments over South Dakota. v. Wayfair, Inc. in the spring and likely hand down their ruling in June.

The justices agreed to take the case, which challenges the precedent set by the court’s ruling in 1992 over Quill Corp. v. North Dakota. The ruling limited local and state governments from collecting sales tax on purchases where retailers did not have nexus or a “physical presence” in that particular state.  

The court’s ruling in June could have monumental effects. Depending on the outcome, consumers may have to pay a sales tax when buying online, and state and local governments could stand to reap a windfall if the 1992 precedent is overturned. A report from the Government Accountability Office estimates “local and state governments could have collected up to $13 billion more in 2017 if they have been allowed to require sales tax payments from online merchants and other remote sellers.”

The case is relevant from a state perspective, as many legislators and Gov. Reynolds have been talking about tax code modernization. If Quill is overturned, it is a clear signal to retailers and consumers that modernization of the tax code will soon follow. This is an issue ABI will be tracking as the case moves forward later this year.