On Thursday, June 21, the Supreme Court of the United States ruled in a 5 to 4 decision that state governments nationwide can mandate all online companies to collect a sales tax from their own consumers. Before this ruling, companies that did not have a physical presence were legally exempt from any sort of sales tax collection requirements. Justices Anthony Kennedy, Neil Gorsuch, Ruth Bader Ginsburg, Samuel Alito, and Clarence Thomas ruled in favor of the South Dakota state government that mandated companies conducting a certain amount of business within their state to collect a sales tax from their customers. Justices John Roberts, Stephen Breyer, Elena Kagan, and Sonia Sotomayor dissented in the ruling.
Writing the majority opinion, Gorsuch and Kennedy agreed that this particular exemption created a “judicially created tax shelter”. The ruling overturns a 1992 decision that created the physical establishment requirement. Organizations such as NetChoice, an e-commerce firm trade association, said that not only small and medium-size businesses as well as consumers could be negatively impacted, but also encounter difficulties with varied state requirements. Market shares for Wayfare and Esty have dropped since the announcement of the ruling.
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