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Should out-of-state online retailers be required to collect sales tax on in-state purchases?

The Amazon website is seen on December 5, 2017 in Dandenong, Australia.
The Amazon website is seen on December 5, 2017 in Dandenong, Australia.
Quinn Rooney/Getty Images

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The U.S. Supreme Court agreed last week to take up a case that would overturn a 1992 decision exempting retailers with no physical presence in a state from collecting state sales tax.

As reported by Reuters, the South Dakota appeal was made following a lower court decision in favor of Wayfair Inc., Inc. and Newegg Inc. Main Street retail supporters like the National Retail Federation are in favor of requiring online businesses to collect state sales tax, regardless of where the company is based. They say the move would even the playing field in the digital age. Since these sales tax requirements were lifted before the online sales boom, trade groups in favor of local retail stores also say the exemption is antiquated.

E-commerce advocates such as NetChoice argue that a change in the law would stifle innovation, putting undue burdens on businesses that don’t have a store, office or warehouse in states where purchases are made.

So how would these state sales tax charges work if the law is overturned? And what would the impact to local brick-and-mortar retailers be if state sales taxes are not required for in-state online retailers?


Steve DelBianco, president of NetChoice, an e-commerce trade association group

Rachelle Bernstein, vice president and tax counsel at the National Retail Federation