State and Local Governments Win Landmark Online Sales Tax Case

On Thursday in the South Dakota v. Wayfair case, the Supreme Court of the United States (SCOTUS) ruled that state and local governments can collect sales tax from vendors that do not have a physical presence in their state. In the 5-4 decision, SCOTUS offered three reasons why it ruled on the side of the localities and states: “First, the physical presence rule is not a necessary interpretation of the requirement that a state tax must be ‘applied to an activity with a substantial nexus with the taxing State.’ Second, Quill [v. North Dakota] creates rather than resolves market distortions. And third, Quill [v. North Dakota] imposes the sort of arbitrary, formalistic distinction that the court’s modern Commerce Clause precedents disavow.” The largest state and local government associations have applauded the decision, stating that “for 26 years Congress has failed to act and through the efforts of Justice Anthony Kennedy, the federal government has finally recognized the changing nature of commerce and state efforts to simplify the collection process.” Read more about it from the National League of Cities.

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