The Mercury News (San Jose, Calif.)
The U.S. Supreme Court has imposed parity on Internet commerce with its ruling that states can collect sales taxes from out-of-state online merchants. For far too long, Internet retailers with no physical operations in many states have been able to evade collecting and passing on sales tax for purchases made by state residents.
It's grossly unfair to their brick-and-mortar competitors, who are disadvantaged because their products cost up to 10 percent more when sales tax is added.
For too many years, we've been hearing online retailers complain that collecting sales taxes would hinder expansion of Internet commerce. Consumers no longer need the incentive of a no-sales-tax discount to consider shopping with their desktop computers or smart phones.
Similarly, we've heard the cry that small online retailers should get a break. There is no logical reason that small brick-and-mortar companies or small online companies located within the state should be required to collect sales tax, but fledgling out-of-state competitors should be exempt.
Finally, some online merchants have said that it's too complicated to keep track of the different tax rates in state and local jurisdictions across the country. Actually, Internet companies such as Amazon, which already collects sales tax for products sold across state lines, has demonstrated that the problem is easily resolved. Enterprising companies will undoubtedly come up with competing products to fill the need, just as TurboTax and H&R Block have done for income tax payers.
The 5-4 ruling crossed philosophical lines on the high court, with Justices Anthony Kennedy, Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito and Neil Gorsuch forming the majority.
Their decision came in a case pertaining to South Dakota's attempt to collect taxes from out-of-state businesses. The justices reversed a 1992 high court ruling that prohibited states from collecting sales taxes from businesses that had no stores, warehouses or other "physical presence" there.
Kennedy and Thomas, who were on the court in 1992, said they regretted the earlier ruling.
"Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States," Kennedy wrote for the majority. We couldn't agree more. It's about time.
Editorial on 06/27/2018