The Supreme Court ruled Thursday that states can require out-of-state online retailers to collect sales taxes, reversing a previous high court decision that limited collections to stores with a physical presence.
In a 5-4 decision written by Anthony Kennedy, the court ruled that that physical presence standard is “unsound and incorrect.”
The ruling in South Dakota v. Wayfair, Inc., provides a major win for brick-and-mortar retailers and state governments hungry for tax revenues. The Trump administration, too, had sought greater latitude for online sales taxes, splitting with many conservatives.
Thursday’s ruling did not fall along the usual partisan lines, as justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito, and Neil Gorsuch joined with Kennedy.
The ruling undid a previous decision, 1992’s Quill Corp. v. North Dakota, that set the precedent that states could not require out-of-state sellers with no physical presence to collect sales taxes on in-state sales.
“Each year,” the decision asserted, that ruling “becomes further removed from economic reality and results in significant revenue losses to the States.”
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