Supreme Court Worries About Abandoning Online Sales Tax Rule in South Dakota Case
WASHINGTON (AP) — The Supreme Court sounded concerned Tuesday about doing away with a rule that has meant shoppers don't always get charged sales tax when they hit "checkout" online.
The justices were hearing arguments in a case that deals with how businesses collect sales tax on online purchases at sites from Amazon.com to Zappos. Right now, under a decades-old Supreme Court rule, if a business is shipping a product to a state where it doesn't have an office, warehouse or other physical presence, it doesn't have to collect the state's sales tax. Customers are generally supposed to pay the tax to the state themselves if they don't get charged it, but the vast majority don't.
More than 40 states have asked the Supreme Court to abandon its current sales tax collection rule , saying that as a result of it and the growth of internet shopping, they're losing billions of dollars in tax revenue every year.
But several Supreme Court justices suggested during arguments Tuesday that they had concerns about reversing course.
Large retailers such as Apple, Macy's, Target and Walmart, which have brick-and-mortar stores nationwide, generally collect sales tax from their customers who buy online. But other online sellers that only have a physical presence in a few states can sidestep charging customers sales tax when they're shipping to addresses outside those states.
South Dakota wanted out-of-state retailers to begin collecting the tax and sued Overstock.com, home goods company Wayfair and electronics retailer Newegg. The state has conceded in court, however, that it can only win by persuading the Supreme Court to do away with its current physical presence rule.
South Dakota Gov. Dennis Daugaard said in a telephone interview after Tuesday's arguments that he hopes the court will fix the rule, but if it doesn't, his state will continue to push for action by Congress.
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