Justice is coming for merchants in small Mississippi towns like Columbia who have been battered by an unfair advantage for their online competitors.
The U.S. Supreme Court’s 5-4 decision Thursday in South Dakota v. Wayfair will allow states to require websites to collect sales tax at the point of sale just like brick-and-mortar stores have been required to do for decades.
That will help Columbia retailers by taking away the de facto 7 percent price advantage that online stores have held, despite offering nothing to this community and not paying any property taxes.
Up until now, a 1992 Supreme Court decision did not allow states to require businesses to collect sales tax unless they had a physical presence in a state.
It’s heartening to see this nation’s high court reach a common sense answer that with the internet you can do business in a state without a storefront and thus the rules need to be updated with the times.
Justice Anthony Kennedy, in the majority opinion, wrote that the existing law “creates rather than resolves market distortions” and is a “judicially created tax shelter for businesses that limit their physical presence in a State but sell their goods and services to the State’s consumers, something that has become easier and more prevalent as technology has advanced.”
Joining Kennedy, the court’s lone moderate, were conservatives Samuel Alito, Clarence Thomas and Neil Gorsuch, along with liberal Ruth Bader Ginsburg.
Chief Justice John Roberts, a conservative, wrote a dissenting opinion joined by liberals Stephen Breyer, Sonia Sotomayor and Elena Kagan. Strange bedfellows, indeed, which illustrates how this nation is torn about how to handle the rapid changes that the internet has made to our economy and way of life.
Roberts argued a decision like this having potentially large effects on the future of the U.S. economy should be left to Congress.
However, the stalemate for the past 25 years was caused by an impression that lawmakers could not overturn the Supreme Court’s interpretation. As Kennedy said in his majority opinion, “It is inconsistent with this Court’s proper role to ask Congress to address a false constitutional premise of this Court’s own creation.”
In fact, the existing law created tax cheats out of just about everyone who ordered online. Buyers were supposed to calculate the sales tax they owed themselves and mail it into the state Department of Revenue. It was laughable to think any significant numbers would have the time or inclination to do so. That’s meant that states like Mississippi, which relies heavily on sales tax, have lost out in revenue needed to provide services for citizens, and local businesses have lost sales.
Amazon.com, the top online retailer, saw the writing on the wall and has already been collecting sales tax in Mississippi and elsewhere. But this ruling will open it up for all online sales to be taxed. That’s the fair and right way to do business, with online and brick-and-mortar stores on a level plane.
— Charlie Smith
