It is not often that the United States Supreme Court makes a decision that will have a lasting impact on the retail industry, but that is exactly what happened on June 21. The U.S. Supreme Court ruled in favor of overturning the outdated standard that was set in the 1992 Quill decision that prevented states from collecting sales tax for online purchases due to the Dormant Commerce Clause. The decision in South Dakota v. Wayfair held that states may charge tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state.
The retail landscape has changed dramatically since 1992. This decision shows that the Supreme Court recognized the need to modernize the law to reflect how consumers are shopping today.
What’s more, this landmark decision for the retail industry helps to better level the playing field between online retailers and brick-and-mortar stores. It is also a huge win for each state as it will bring much-needed revenue that was previously not accessible.
The next step is for state and federal lawmakers to create a formal tax policy for how this revenue will be collected. The Supreme Court did layout a roadmap of sorts for how this should be done, which reflects parts of the South Dakota law. Over the next few years, we will see how this ruling will be enacted, whether through Congressional change or at the state level.
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