SALT Report 3823 – Many states have laws that require online retailers to collect sales taxes if they have a store, warehouse or subsidiary in-state, or if they contract with a local business to advertise their products. The laws conform to a standard the U.S. Supreme Court established in its 1992 ruling in Quill Corp. v. North Dakota.
Online businesses have long contended that collecting taxes in the 45 states that tax retail sales would be too burdensome. But states say that argument is outdated because new software can calculate the tax and about half the states have adopted standardized sales tax rules.
South Dakota hopes a law it enacted this year will force the courts to take a second look. The measure requires any online business that sells more than $100,000 worth of goods in the state or processes more than 200 orders for South Dakotans to collect a sales tax.
South Dakota’s law goes beyond the Quill decision by stating that online businesses have a presence in the state simply because of the volume of sales they have there. South Dakota and other states are hopeful the U.S. Supreme Court will reconsider its Quill ruling based on that logic. They are pinning their hopes on Associate Justice Anthony Kennedy’s remarks in a Colorado case from last year. He said it may be time to reconsider Quill, calling it “questionable even when decided.”
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