US Supreme Court Holds States Can Require Out-of-State Sellers to Collect and Remit Sales Taxes

In one of the most highly anticipated decisions of the term, the US Supreme Court held today that states may require sellers who have no physical presence within the state to collect and remit sales taxes on goods sold to buyers in the state. Justice Anthony Kennedy wrote the opinion for the majority, and Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito, and Neil Gorsuch joined. The decision overrules two prior cases in which the Court established and upheld the so-called “physical-presence rule” for sales tax, citing drastic changes in the reality of shopping and commerce.

In dissent, Chief Justice John Roberts opined that the decision to overrule the “physical-presence rule” should come from Congress, not from the Court. Joining him in dissent were Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan.

While online mega-retailers like Amazon already collect and remit sales tax for purchases directly from Amazon, many other online retailers, such as Etsy, Wayfair, and do not. The decision opens the door for many states to require online retailers to collect sales taxes in states where they have no physical presence.

Additional reading:

Supreme Court Clears Way to Collect Sales Tax From Online Retailers, New York Times, June 21, 2018

South Dakota v. Wayfair, Inc. (Opinion via Justia Supreme Court Center)

South Dakota v. Wayfair, Inc. (Oral argument audio and transcript via Oyez)