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OR

State Sales Internet Tax Ruling Worth Billions

Oct 11, 2017, 13:15 PM by SPAN
The fight to force all businesses to collect sales taxes is moving forward.

The South Dakota Attorney General said the state is one step closer to forcing a re-examination of the fairness gap between online and brick and mortar transactions when it comes to sales taxes.  Recently, the SD State Supreme Court ruled that companies selling wares over the internet can’t be forced to collect South Dakota’s 4.5 percent tax on purchases, laying the groundwork for a U.S. Supreme Court appeal that could change law across the country.

  • In a made for the Court play, the case of State of South Dakota v. Wayfair, Overstock and Newegg is a legal challenge to the Main Street Fairness Act. Legislation introduced in the SD State Senate would allow the state to collect sales taxes from out-of-state businesses that do more than $100,000 worth of business or more than 200 individual transactions.
  • The legislative effort is designed to overturn a 1992 U.S. Supreme Court precedent that prohibits states from collecting sales and use taxes on businesses without a physical presence in the state. The bill was drafted to provide for U.S. Supreme Court review once the SD Supreme Court rejected it.

Why it’s important: Federal law currently shields out-of-state businesses from paying the same tax remitted by in-state businesses. A decision forcing out-of-state businesses to collect such taxes could be worth billions in revenue to state and local governments. Those in the scrap business are included under the state law that requires all businesses to collect taxes.

  • Collecting sales tax on scrap transactions could become a regular occurrence in all 50 states if the U.S. Supreme Court overturns the current legal precedent established in the 1992 Quill Corp. v. North Dakota. 
  • The tax question is not just for online retail transactions even though that is where the primary focus has been. The fact is that scrap dealers, brokers and possibly even frequent peddlers could, depending on the US Supreme Court’s decision, be looking at collecting or remitting sales taxes based on the volume of business. Contact Danielle Waterfield for more information.

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