Internet Merchant Sales Tax Alteration


Supreme Court Overrule the Physical Presence Standard

Looming changes may be ahead leading to internet retailers to be required to collect sales tax where they have no physical location based on a Supreme Court ruling on Thursday, June 21st.  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.  The overruling of Quill Corporation v. North Dakota (a 1992 Supreme Court decision) on Thursday, June 21, 2018 evens the playing field between Brick-and-Mortar and e-commerce businesses.  The 1992 Quill decision prohibited states from collecting sales taxes from retailers unless they had a physical connection with the state.

From 1992 until today, much has changed in the way consumers purchase products. With an estimated $453.5 billion in e-commerce sales last year, the states feel they are missing out on additional annual tax revenue. Although the overruling leads to imminent changes, there is still much that is unknown including whether states may seek sales taxes retroactively or what amount in sales will justify sales tax collection.

Regardless of the details, businesses will face new burdens in trying to comply with the tax law in each state in which they sell their products.  The effects of this ruling have already had an influence on some e-commerce company shares in the marketplace.

Look for more information provided by Louis Plung & Company Tax professionals as more details regarding this decision become available.

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