NEW YORK — The U.S. Supreme Court’s decision on online sales tax is viewed as a victory for states, but those with aggressive collection policies, such as New York and California, could be challenged by online retailers.
By overturning a ruling that had made much of the Internet a tax-free zone, the court delivered a victory to South Dakota and effectively blessed its model of collecting sales tax from online retailers. Justice Anthony Kennedy defended the state’s measures as preventing “discrimination against or undue burdens upon interstate commerce.”
South Dakota taxes most products at a single rate, exempts small sellers and doesn’t allow retroactive collection. New York and California’s rules are more complex, and those states have sought to increase sales tax collection by using broader definitions of what it means to do business within their borders.
Both states already require retailers to collect tax if they have digital ties to the states.
“New York and California would likely have to make some pretty big changes,” said John Buhl of the Tax Foundation. “South Dakota has a uniquely simple law since it generally taxes all consumer purchases instead of carving out a bunch of exceptions, and online sellers can remit their taxes to the state instead of each and every locality.”
The decision reverses a 26-year-old standard that allowed states to levy sales taxes on e-commerce sales only if the sellers had physical locations in the state.
Among the biggest winners are small or less populous states where retailers are not as likely to have stores or employees.
While states like New York may be emboldened to test the bounds of what’s now possible, situs judi bola retailers are likely to rein in those states through legal action.
The New York State Department of Taxation and Finance didn’t respond to a request for comment.
“This decision is not the end of the days for this case,” said Jamie Yesnowitz, a National Tax Office leader at accounting firm Grant Thornton.
Rep. Tom Reed, R-N.Y., said he supported the ruling’s creation of a level playing field between online sellers and physical retailers. But he said he’s concerned that it will create a complex web of online sales rules that could prompt some businesses to move.
“When you are dealing with the virtual cloud, it gets complicated,” Reed said. “This is an area that’s very much in a state of disruption.”
Online retailers will have to deal with a hodgepodge system until Congress enacts a federal standard, which is unlikely this year given the midterm elections in November.
Amazonm and Overstockm are among the companies that say they support a nationwide law that would relieve retailers from dealing with a patchwork of state tax laws.
Lawmakers have tried unsuccessfully to pass online sales tax legislation for years, with the most recent attempt failing after several conservatives called the provision a tax increase on online shoppers. Some Democrats also opposed the measure.