“Retailers have been waiting for this day for two decades,” says NRF CEO.
The Supreme Court of the United States on Thursday overturned the landmark Quill case and ruled that states may require online retailers to collect state sales taxes even if they don’t have a physical store in the state.
The 5-4 decision came in the case South Dakota v. Wayfair. The Court noted the decision was not based on changes in technology since the Quill decision. The ruling upholds a 2016 South Dakota law that requires online merchants with more than $100,000 in annual sales to state residents or 200 transactions with state residents to collect sales tax.
The National Retail Federation’s President and CEO Matthew Shay responded: “Retailers have been waiting for this day for more than two decades. The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well. This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.”
NRF argued in a friend-of-the-court brief last year that the court’s 1992 Quill Corp. v. North Dakota decision was outdated and that sales tax collection is no longer the burden it might once have been due to changes in technology. In the brief, NRF cited a wide variety of software available to automatically collect the sales tax owed, much of its available free or at low cost.
NRF and other retail groups said in a second brief filed this year that lack of uniform collection is “inflicting extreme harm and unfairness” on local retailers by “distorting the retail market in favor of absentee ecommerce.”
The court agreed, noting “It is unfair and unjust to those competitors, both local and out of State, who must remit the tax; to the consumers who pay the tax; and to the States that seek fair enforcement of the sales tax, a tax many States for many years have considered an indispensable source for raising revenue.”
RILA Weighs In
“Today’s decision culminates years of tireless work by the retail community to reverse a pre-internet era rule that distorts free markets and puts local brick and mortar stores at a competitive disadvantage with their online-only counterparts,” said Deborah White, general counsel for the Retail Industry Leaders Association (RILA) and president of the Retail Litigation Center. “This was the right case and the right time for the Court to act, and we couldn’t be more pleased with the outcome.”
Addressing the suggestion that new collection requirements would be a burden to start-ups and small online retailers, White pointed to the dramatic changes in network computing and e-commerce in the last quarter century.
“The Court clearly didn’t buy the argument made by the Respondents in this case that remote sales tax compliance represented the same burden today that it did in 1992,” said White. “Through its decision, the Court has acknowledged that the same computing sophistication that has fueled exponential growth in e-commerce has also dramatically simplified remote sales tax collection.”
Given the Court’s ruling, White expects the 45 states with a sales tax to work expeditiously on legislative and regulatory solutions to close the online loophole in their states.
“States had this authority taken from them decades ago,” said White. “Most will work quickly and judiciously to reclaim their authority and create a level playing field for all retailers selling to customers in their states.”
On the impact of the decision for the retail industry and its customers, White said today’s decision would ultimately be a win for both.
“Today’s ruling will give every retailer the opportunity to compete on a level playing field without government’s thumb on the scale—that’s a win for all those who believe in free markets,” said White. “For the consumer, this means an increasing array of options both in-store and online, with competition for their business based on price, service, selection and value—not special tax treatment.”