Wed | Nov 21, 2018

US Supreme Court rules online shoppers can be forced to pay sales tax

Published:Thursday | June 21, 2018 | 1:16 PM
US Supreme Court - AP photo

WASHINGTON (AP) — States will be able to force shoppers to pay sales tax when they make online purchases under a Supreme Court decision Thursday that will leave shoppers with lighter wallets but is a big win for states.

More than 40 states had asked the high court to overrule two decades-old Supreme Court decisions that they said cost them billions of dollars in lost revenue annually.

The decisions made it more difficult for states to collect sales tax on certain online purchases.

On Thursday, the Supreme Court agreed to overturn those decisions in a 5-4 ruling.

The cases the court overturned said that if a business was shipping a customer’s purchase to a state where the business didn’t have a physical presence such as a warehouse or office, the business didn’t have to collect the state’s sales tax.

Customers were generally responsible for paying the sales tax to the state themselves if they weren’t charged it, but most didn’t realise they owed it and few paid.

Justice Anthony Kennedy wrote that the previous decisions were flawed.

“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States. These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause,” he wrote in an opinion joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito and Neil Gorsuch.

Under the Supreme Court’s decision Thursday, states can pass laws requiring sellers without a physical presence in the state to collect the state’s sales tax from customers and send it to the state.

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