Washington could collect hundreds of millions of dollars a year in extra tax revenue from a new Supreme Court ruling that says online shoppers owe their state sales tax even if they buy from a company in another state.
Just how much is unclear, as state officials are still studying Thursday’s 5-4 ruling that overturned existing case law on collecting sales tax from online purchases from out-of-state merchants.
Washington, which relies heavily on sales tax for state programs and salaries, has tried for years to collect the taxes on the increasing volume of goods purchased online from merchants outside its borders. So-called brick-and-mortar stores in Washington that were losing business to online competitors said they were at a disadvantage because customers could avoid state and local sales taxes, which range in various locations from 8.5 percent to 10.4 percent.
A 1992 U.S. Supreme Court ruling held that businesses with no physical presence in a state can’t be required to collect and remit taxes on goods shipped to that state.
In South Dakota, the loss in sales tax to internet retailers caused that state to pass a law requiring out-of-state merchants with a certain level of sales in the state to collect the South Dakota sales tax and send it in. It later sued Wayfair, Overstock.com and Newegg, which had no buildings or employees in the state, for refusing to collect the tax because of that 1992 decision. Washington was one of 41 states and the District of Columbia that joined the case supporting South Dakota.
On Thursday, Justice Anthony Kennedy wrote for the court’s majority that the 1992 decision is outdated, distorts markets, and unfairly shifts the tax burden to the businesses that do collect those sales taxes. (Spokesman-Review)
