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June 21, 2018
U.S. SUPREME COURT RULING ALLOWS STATE & LOCAL GOVERNMENTS TO COLLECT TAXES FROM OUT-OF-STATE VENDORS
Today, the U.S. Supreme Court made a landmark decision in
South Dakota v. Wayfair
. The court has ruled in a 5-4 decision that states and local governments can require vendors with no physical presence in the state to collect sales tax. The decision means states and their political subdivisions can collect taxes due from internet retailers selling goods into states and communities across the country and updated the legal definition of "nexus." In the ruling, "economic and virtual contacts" are listed as "substantial nexus" - sufficient to allow the collection of state and local sales tax on remote sales.
This ruling is a long-awaited decision not only for state and local governments but for small businesses on municipal Main Streets across the country. Internet sales have risen astronomically since 1992 and states and local governments have been unable to collect most taxes on sales from out-of-state vendors. The estimated loss of revenue due to the inability to collect on these taxes to remote sales totals somewhere in the billions of dollars. State and local governments will now be able to receive the revenue from these commercial activities that are rightly afforded them. In addition, the small businesses with physical presence in those local jurisdictions will no longer bear the burden of being taxed while sales from remote retailers go untaxed.
The leading organizations that represent state and local governments - National League of Cities, The Council of State Governments, International City/County Management Association, National Association of Counties, National Conference of State Legislatures, National Governors Association and the U.S. Conference of Mayors released the following statement regarding the U.S. Supreme Court's ruling in
South Dakota v. Wayfair, which overturned the outdated physical presence test:
"State and local organizations applaud the U.S. Supreme Court's decision recognizing that the 1992
Quill
ruling put Main Street retailers at a competitive disadvantage to remote sellers and the efforts by states to simplify the sales tax collection process and giving those states remote sales tax collection authority. For 26 years Congress has failed to act and through the efforts of Justice Anthony Kennedy, the federal government has finally recognized the changing nature of commerce and state efforts to simplify the collection process."
HERE is a link to an article from the National League of Cities (NLC) magazine CitiesSpeak providing more detail on today's Wayfair
ruling.
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