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Supreme Court appears divided on online sales tax

By
Danielle Haynes
South Dakota Attorney General Marty Jackley speaks after the Supreme Court heard oral arguments in South Dakota vs. Wayfair regarding the legality of a new South Dakota sales tax law that imposes sales tax on out-of-state businesses with no physical presence in the state Tuesday. Photo by Kevin Dietsch/UPI
South Dakota Attorney General Marty Jackley speaks after the Supreme Court heard oral arguments in South Dakota vs. Wayfair regarding the legality of a new South Dakota sales tax law that imposes sales tax on out-of-state businesses with no physical presence in the state Tuesday. Photo by Kevin Dietsch/UPI | License Photo

April 17 (UPI) -- The Supreme Court appeared split Tuesday on whether to allow states to start collecting sales tax from online retailers.

The court heard arguments in a case brought by the South Dakota attorney general's office, which seeks to overturn the Supreme Court's 1992 ruling that exempted companies from charging sales tax from customers if they don't have a retail location in the state. The ruling largely applied to mail-order sales, but was subsequently put to use for online sales as well.

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Should states be allowed to collect sales tax from online sales, they could see an increase of taxes collected between $8 billion and $23 billion each year, according to various estimates cited by Bloomberg.

Justices Anthony Kennedy, Neil Gorsuch and Clarence Thomas indicated they are wish to overturn the earlier case, Quill vs. North Dakota. Ruth Bader Ginsburg also said she was willing to join them.

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"Anyone who wants to sell in-state, whether an in-state shop, an out-of-state shop, everybody is treated to the same tax collection obligation," Ginsburg said.

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They'd need one more justice to join them in order to overturn the ruling.

South Dakota recently passed a law in which all online retailers would be required to charge sales tax except those that have fewer than 200 transactions or less than $100,000 in sales annually in the state. Justice Samuel Alito called the law "the most reasonable incarnation of this scheme," but other states might attempt "to grab everything they possibly can."

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Justice Elena Kagan suggested fixing the law should be left to Congress.

The Supreme Court is expected to rule on the case in June.

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