Supreme Court To Rule On Sales Tax Of Online Purchases

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Overstock.com has a small but unmistakable advantage for anyone looking to buy a 3-cup Cuisinart Mini Prep Plus Food Processor for shipment to Germantown, Maryland: Purchasers don't have to pay the 6 percent sales tax they'd owe at a local store.

A decision on the case by the U.S. Supreme Court is expected to be announced in June.

At the time, the court cited state sales tax laws that were too complicated for retailers to know how much to collect unless they had a physical presence in that specific state. Next on Marketplace Tech, a look at the history of why online retailers haven't collected sales tax - unless they have a physical presence in a state ... and how likely that is to change.

And while the issue is portrayed as one of fairness for small brick-and-mortar retailers that have to compete against online retailers, experts say those small retailers could be among the ones that get hurt. "A retailer today can transact a significant amount of business in a state without ever being physically present in the state". Wayfair Inc. essentially pits the 45 states that impose a sales tax against the handful that don't.

The case will also affect e-commerce behemoth Amazon.com Inc., though less directly. Amazon collects sales tax on its own products, but not on other businesses' products that are sold through its website. "And the more types of products I sell, the more hard it is to map to the software that's out there". But as Amazon has grown, dotting the country with warehouses, it has had to charge sales tax in more and more places.

The case is especially timely since President Donald Trump has publicly blasted Amazon for not collecting sales taxes, even though it does so on its own sales.

The court showdown instead involves Wayfair, Overstock and Newegg, three retailers sued by South Dakota for not charging taxes to consumers there.

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Many smaller retailers don't; unless they have a physical presence in the state where the buyer lives.

In 2016 the state passed a law requiring those sellers to collect taxes on sales into the state, a law challenging the Supreme Court precedents.

That practice stems from a 1992 Supreme Court decision. "The entire nature of interstate commerce has changed", Martz said.

It's unclear how the justices might align on the question this time. Wayfair argues more than 16,000 different taxing units could demand sales tax collections.

"Today's online giants do not need or deserve the special tax treatment that the Court gave mail order catalog companies a half century ago", Deborah White, General Counsel for the Retail Industry Leaders Association, said in a statement last month.

On April 17, Tuesday, the U.S. Supreme Court will conduct oral arguments, and will decide whether it will retain or overturn a 26-year-old ruling related to catalog retailers. The state has the backing of the Trump administration.

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