Supreme Court lets states charge internet retailers more in taxes

The east facade of the Supreme Court of the United States

The east facade of the Supreme Court of the United States Wikimedia Commons

"That should be a message to the states", Heitkamp told Reuters.

The Supreme Court ruled on Thursday that states can force retailers to collect sales tax even if they don't have a physical presence in that state. In upholding the ruling the Supreme Court overturned a 1992 ruling that required a "physical presence" in a state in order to mandate collection of sales tax.

But in the often perverse calculus of modern day politics, the move to go after that billion dollar pot of money may not be as easy as it seems. Five states don't charge sales tax.

Sales tax is pretty interesting in the United States as it's done on a state-by-state basis. Regardless, your online shopping (depending on who you use) likely just got notably more expensive. And Hinojosa warns the scales are always tipped against any new tax legislation.

Dominic Calabro, president of Florida TaxWatch, a business-oriented advocacy group, said the ability to apply the sales tax to more internet sales will keep the state's tax structure in sync with the evolving economy.

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The Supreme Court ruled 5-4 in favor of South Dakota. For decades, these sales tax laws were only applicable on purchases that were made from retailers who had a physical presence within that state. The decision sent share prices for Amazon, Overstock, Wayfair, Ebay and Etsy tumbling.

E-commerce sales are expected to continue to take an increasing portion of total retail sales, so state and local governments should be rejoicing about this ruling. In South Dakota alone, a state with a population of less than 1 million people, The Department of Revenue estimates that the state government could take in up to $58 million annually. Property taxes have come under major political pressure: Taxpayers have revolted against increases in this inflexible tax, voting to impose caps that have in some states kept revenue growth well below economic growth.

National retailers such as Apple, Target and Walmart are already collecting online sales taxes.

The exact impact of the ruling on Florida's sales tax collections is unknown but it could be significant. Most of the states are in a budget crunch. The Supreme Court decision clears the way for states to unwind that competitive advantage.

"We did all of this for the state of South Dakota predominantly because we are a simple sales tax state". South Dakota was backed by the Trump administration in the case. "(They) pay property taxes, lease or own retail space, support their communities through charitable contributions and help their communities recover after natural disasters". Even with strong Republican opposition to the ruling at the federal level, Hinojosa says he doesn't see the issue breaking along party lines in the Texas Legislature.

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