U.S. Supreme Court Rules States Allowed to Require Online Retailers to Collect Sales Tax
On June 21, 2018, the United States Supreme Court issued a decision allowing states to require online retailers to collect sales tax regardless of whether the retailer has a physical presence in the state.
The financial impact of the decision for Wisconsin counties is unclear as the amount of uncollected taxes is not precisely known. However, nearly all major online retailers currently have a presence in the state. Thus, the vast majority of online sales are currently being taxed in Wisconsin. We will keep members updated as the Wisconsin Counties Association (WCA) learns more about the impact of the decision.
See below for a short explanation of the Supreme Court’s ruling and a link to the decision.
Summary
In South Dakota v. Wayfair, the Supreme Court ruled that states can require out-of-state internet retailers to collect sales taxes. This case involved a South Dakota law requiring all merchants with more than $100,000 in annual sales or more than 200 individual transactions in the state-to collect a 4.5% sales tax. Wayfair, Overstock.com, and Newegg refused to collect the sales tax, and South Dakota sued.
Considering this situation, the Supreme Court ruled that a state can levy sales taxes on purchases made through online retailers that do not have a physical presence in the state. This decision is meaningful because it overrules a prior Supreme Court decision from 1992, which prohibited states from requiring out-of-state businesses to collect sales taxes. Consequently, South Dakota v. Wayfair will have implications for many online retailers and for state and local governments’ ability to generate sales tax revenues.
As always, please contact us at WCA with any questions at 866.404.2700.
