The Supreme Court has agreed to hear South Dakota v. Wayfair, Inc., a challenge to a decades-old ruling that has exempted sales by e-commerce companies from collecting state and local sales tax, reports Bloomberg.
That old ruling, 1992’s Quill Corp. v. North Dakota, established a lasting precedent that states could tax only sales by businesses that reside within the state’s borders. Even though the case concerned a mail order company, the decision has been used by internet companies to avoid collecting state and local sales tax.
Critics of the 1992 decision say it no longer fits a world where much of our commerce happens, at least in part, online. The Government Accountability Office estimates that, had they been allowed, states and local governments could have collected as much as $13 billion in additional taxes on online sales.
The online retailers Wayfair, Overstock.com, and Newegg will be lining up against the state of South Dakota in the High Court. Amazon, which isn’t directly involved in the case, already collects state sales tax on products it sells under its own brand, but it could be forced to require that all third-party sellers collect sales tax, too.