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Online sales tax goes to high court

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WASHINGTON — The National Retail Federation (NRF) and the Retail Industry Leaders Association each welcomed the decision by the U.S. Supreme Court to reenter the dispute over whether states should be able to require online retailers to collect and remit state sales taxes.

Retailers and others had been expecting the court to take up the issue after South Dakota’s Supreme Court ruled last year that the state cannot force remote retailers to collect sales tax on purchases made by local residents.

South Dakota’s attorney general appealed that ruling, asking the Supreme Court to revisit its 1992 ruling in Quill Corp. v. North Dakota that established the precedent that prohibits South Dakota from requiring retailers without a physical presence within its borders to collect sales tax on local purchases.

That precedent was established with catalog sales in mind, and before the meteoric rise of internet retailing. In the meantime, South Dakota and other states have had mixed results arguing that since the sales tax is a long-established way for state governments to pay for the services their constituents demand, it’s unfair to allow some retailers to skip it.

“Retail is a dynamic industry that’s rapidly transforming,” Matthew Shay, NRF’s president and chief executive officer, said in a statement earlier this month. “Unfortunately, antiquated sales tax collection rules have resulted in an uneven playing field that’s making it harder for Main Street retailers to compete in today’s digital economy. This is a basic question about fairness, which all of our members deserve whether they’re selling in stores or online.”

NRF also urged Congress to address the issue through federal legislation. “Even if the court rules in favor of a modern sales tax policy, legislation will still be needed to spell out how that would work,” Shay said. NRF supports legislation, called the Remote Transactions Parity Act, that would grant states authority to enforce state and local sales and use tax laws on remote ­transactions.

“The Court’s decision to grant South Dakota’s petition is an important signal for retailers that invest in storefronts and jobs in local communities,” said Deborah White, RILA general counsel and president of the Retail Litigation Center. “Retailers have supported this case since the beginning, and believe it is the right case to correct the constitutional course set more than 50 years ago — well before the advent of e-commerce — that today gives online-only retailers an unfair commercial advantage at the expense of local retailers.”


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