US states can now collect sales taxes from online retailers, the nation’s Supreme Court has ruled.
The court overturned a 1992 decision that exempted companies from the duty if they didn’t have a physical presence in the state. Traditional retailers largely considered that status quo unfair, as, they claimed, it gave e-commerce players a competitive advantage. Five out of nine Supreme Court justices voted in favor of the change Thursday.
“This historic decision from the court in support of sales-tax fairness is a major victory for the jewelry industry, providing a clear path to level the playing field between traditional and online retailers,” said David Bonaparte, CEO of Jewelers of America.
Congress must now pass federal legislation that lays out the rules for collecting sales tax, the jewelry trade organization, which has long campaigned for the reform, added.
The case, South Dakota v. Wayfair, arose after South Dakota enacted a law requiring out-of-state sellers to charge customers sales tax as if the retailers had a physical presence in the state. South Dakota sued certain online retailers that, it claimed, should be paying the duty, as they met the act’s requirements of at least $100,000 in annual sales to — or 200 transactions with — South Dakota residents.
The e-tailers then claimed the state’s law was unconstitutional. They were successful in state courts, which relied on the 1992 precedent of Quill Corp. v. North Dakota. However, the Supreme Court has now overturned Quill.
Shares in Overstock, one of the US’s largest online retailers, fell 7% Thursday following the ruling. Amazon stock dropped 1.1% during the day.