US Supreme Court rules on online sales tax

The US Supreme Court has overturned a ruling that had given online retailers a way of avoiding some state taxes.

NY Times: Supreme Court Clears Way to Collect Sales Tax From Online Retailers

Internet retailers can be required to collect sales taxes in states where they have no physical presence, the Supreme Court ruledon Thursday.

Brick-and-mortar businesses have long complained that they are disadvantaged by having to charge sales taxes while many of their online competitors do not. States have said that they are missing out on tens of billions of dollars in annual revenue under a 1992 Supreme Court ruling that helped spur the rise of internet shopping.

On Thursday, the court overruled that ruling, Quill Corporation v. North Dakota, which had said that the Constitution bars states from requiring businesses to collect sales taxes unless they have a substantial connection to the state.

This could be significant for New Zealand. If internet retailers like Amazon have to comply with all the state taxes in the US (a complex thing) depending on the location of the purchaser,then it should be simple to also comply with tax requirements for other countries.

Writing for the majority in the 5-to-4 ruling, Justice Anthony M. Kennedy said the Quill decision had distorted the nation’s economy and had caused states to lose annual tax revenues between $8 billion and $33 billion.

But there could be a downside. If online retailers are forced to charge more tax in the US they may look for more sales in places where they can get away without charging tax.