The status of the Internet sales tax in 2018 shows us both the merits and weaknesses of the court system and the Supreme Court in the United States. The Internet has been a massive commercial platform for twenty plus years now. The last 18 or so have involved an argument between states and companies over whether states can collect Internet sales tax from companies that sell to citizens of their states online, but don’t have a physical presence in the state. The Supreme Court let this issue fester for nearly two decades. Fortunately, the Court finally acted in 2018.
Sales Tax History
The 1990s are known for many things. From a tax perspective, lawyers and CPAs know the decade for the decision Quill Corp. vs. North Dakota. Quill is a Supreme Court decision that addresses the question of whether states can force out of state retailers to collect and remit sales tax on catalog sales. This video digs into the specifics as well as the shortcomings of the Supreme Court.
The case is an excellent example of how the Supreme Court views its role in establishing laws. The Court typically selects cases for review that will set basic standards in a particular niche of law. The case typically involves a change in society.
In the current situation, the Court is acknowledging a fundamental change in society. With the Internet, the concept that state borders should be used as part of a test becomes a bit ridiculous. No such limits exist online. The Supreme Court in Wayfair announced it will now be recognizing the unique nature of the Internet in future cases. Any areas of law relying on antiquated geographic factors that are no longer relevant in a digital world are ripe for reconsideration.
After years of not much happening, the Supreme Court upended the cart when it came to Internet sales tax in 2018. Now the states and businesses will fight out the ramifications and consequences of the decision.
Richard A. Chapo, Esq.