On June 21, the US Supreme Court overturned a 26-year ban on levying online sales tax, satisfying South Dakota’s complaint of an outdated ruling that had made much of the internet a tax-free zone.
In 2016, South Dakota Governor Dennis Dugerd said his state is losing about $ 50 million a year in sales taxes, as many online retailers are not physically in the state. In particular, the complaint concerned the furniture store Overstock.com, electronics seller Newegg and the company manufacturing goods for Wayfair.
South Dakota law requires retailers with more than $100,000 in sales or 200 transactions annually in the state to pay a 4.5 percent tax on purchases.
The US Supreme Court ruled in favour of South Dakota.
The Trump administration supported the Republican initiative saying that the old Supreme Court ruling put traditional retailers at a disadvantage. The ruling is “a big, big victory” for them and was a “good decision,” President Donald Trump told governors at the White House.
In turn, the US Government Accountability Office (GAO) said that sales taxes may generate $ 13 billion in revenues to local budgets.
Now, for the first time since 1992, any of the US states have the right to impose a tax on online shopping.
Wayfair, Overstock and Newegg opposed the measure saying that small sellers would be hit with heavy costs of complying with rules for thousands of products in thousands of taxing jurisdictions.
“Each year, the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the states,” said Supreme Judge Anthony Kennedy and added that the criticism only emphasizes that the rule of physical presence is an erroneous interpretation of the Trade Law.