Taxes may be collected by states for Internet sales

The Supreme Court ruled today that states can collect state sales taxes from online retailers on consumer purchases. The decision overruled a decades-old precedent that had protected out-of-state sellers from being required to collect such taxes.

Historic City News received estimates from the Government Accountability Office that between $8 billion and $13 billion per year are lost by states who now stand to gain billions of dollars with the ruling.

“The Internet’s prevalence and power have changed the dynamics of the national economy,” Justice Anthony Kennedy wrote for the majority. And, in 2015, Justice Kennedy suggested he was prepared to overrule the Supreme Court’s 1967 and 1992 decisions in light of modern realities.

The decision, which marks a new era for an Internet economy that has boomed over the past decade and become a dominant force, will have dramatic consequences for small online retailers who have online customers across many states.

Forty-five states rely on sales taxes for revenue, and for those states like Florida that have no income tax, sales taxes are very important. Estimates of how much money the states are losing vary dramatically, ranging as high as more than $200 billion over five years.

Justice Gorsuch once called the current system “a judicially created tax shelter.” The 5-4 decision defied the usual conservative-liberal lineup with Kennedy joined by liberal Justice Ruth Bader Ginsburg, and conservatives Samuel Alito, Neil Gorsuch and Clarence Thomas. The conservative chief justice, John Roberts dissented along with liberals Stephen Breyer, Sonia Sotomayor and Elena Kagan.

For much of the last decade, states have been pressing Congress to fix the problem, to pass a bill that levels the playing field. But Congress, buffeted by anti-tax groups, has walked away from the issue.