Battle over sales taxes on online purchases heads to Supreme Court

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North Dakota-established that states could only collect sales tax from a retailer with an established physical presence within their boundaries.

It does seem fair, because as it now stands, certain retailers have an unfair advantage over others.

Small retailers are not collecting state taxes from online shoppers unless the store has a physical presence in the state where the buyer lives.

In fact, chances are pretty good that you already pay sales tax on at least some of your online purchases if you live in a state that has sales tax. However, the vast majority of purchasers do not pay tax on these transactions (98-99%), and it's likely that many aren't even aware of this law.

"South Dakota's choice to forego its remedy for back taxes in the event that the Court were to overrule [existing law] will not limit the retroactive application of such a ruling with respect to other state and local jurisdictions", said Wayfair's attorneys. "The entire nature of interstate commerce has changed", says Stephanie Martz, general counsel of the National Retail Federation, which has members such as Walmart Inc., Target Corp., and Amazon. Walmart also collects sales tax on all online purchases.

Initially meant to regulate catalog-based sellers, the ruling has been challenged again and again by states seeking to claim their fair shake of online sales.

The Trump administration will join the oral argument in favor of online retailers being required to collect sales taxes everywhere. Something brick-and-mortar have argued will level the playing field. States say they're losing out in billions of dollars in tax revenue. "For small businesses on tight margins, these costs are going to be fatal in many cases", Andy Pincus, who filed a brief on behalf of eBay and small businesses that use its platform, told the Associated Press.

That practice stems from a 1992 Supreme Court decision.

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