A "quarter century of experience has convinced me" the Supreme Court's earlier decision was no longer justified, he wrote, adding that it was "never too late" to arrive at a better position. North Dakota, which had said that the Constitution bars states from requiring businesses to collect sales taxes unless they have a substantial connection to the state. In his majority opinion, Justice Kennedy said it was "inconsistent" for the Supreme Court to ask Congress to "address a false constitutional premise of this Court's own creation".
"Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States". Lawmakers in the state, which has no income tax, passed a law created to directly challenge the physical presence rule. "They will need to stop thinking about where they have employees and other potential physical presence, and start thinking about where they're making sales". In those states, it is the responsibility of the seller to collect taxes and remit them to the state.
IL consumers are supposed to pay use tax to the state if sales tax isn't charged on a purchase, but experts say underreporting is an issue.
Retailers with many bricks-and-mortar locations, or larger online retailers with large networks of distribution centers, argued the exemption for companies without a physical location gave online competitors who didn't have to collect taxes an unfair advantage. Thursday's decision overturned that ruling, saying that the omnipresent nature of internet commerce calls for an updated tax structure.
Colorado already has a law in place prodding collection of sales taxes from out-of-state online retailers. In Quill, the Supreme Court concluded that a state could not require an out-of-state seller to collect sales tax on a sale to a resident of the state. The burden fell on the consumer to report their online purchases when filing taxes. "This is a victory for Alabama's Main Street retailers".
For those who tend to patronize the biggest retailers, the ruling may not make much of a difference.
Recent attempts at the Roundhouse to impose the state's gross receipts tax on internet vendors have failed - one proposal was line-item vetoed by Gov. Susana Martinez previous year - but lawmakers from both political parties have described the measure as a fairness issue that could help local businesses. Any adjustment to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress.
In his dissent, Chief Justice John Roberts wrote that Congress, not the court, should change the rules if necessary.
By one government estimate, states can stand to reap between $8 billion and $13 billion in new revenue.
States like South Dakota that depend heavily on sales taxes for their revenue are likely to benefit most, with a predicted maximum revenue increase of around 3 percent, according to a Barclays research note.
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