South Dakota is asking the nine justices to overturn a 1992 Supreme Court precedent that states can not require retailers to collect state sales taxes on purchases unless the businesses have a "physical presence" in the state.
It does seem fair, because as it now stands, certain retailers have an unfair advantage over others.
Software does exist that would allow online retailers to easily automate the state and local sales tax collections process.
South Dakota depends more than most states on sales taxes because it is one of nine that do not have a state income tax. However, the vast majority of purchasers do not pay tax on these transactions (98-99%), and it's likely that many aren't even aware of this law.
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South Dakota sued top online retailers Wayfair, Overstock, and Newegg, for failing to comply to the said state tax law. But online-only merchants-especially the large number of independently-owned businesses on sites like Etsy and Ebay-worry that this is more of a cash grab by state and local governments. "The entire nature of interstate commerce has changed", says Stephanie Martz, general counsel of the National Retail Federation, which has members such as Walmart Inc., Target Corp., and Amazon.
Retailers that have brick-and-mortar stores and are already collecting taxes are backing South Dakota.
Online retailers said reversing the 1992 precedent is a negative move in terms of e-commerce.
"Online retailers are omnipresent today - on consumers" smart phones, laptops, tablets, and computers - in a way that was inconceivable in 1967 or 199", she continued.
Large retailers say the rule puts them at a competitive disadvantage.
Those opposed to a re-write of the law warn that the cost to small businesses could be too much to bear.
But small businesses that sell online say the complexity and expense of collecting taxes nationwide could drive them out of business. South Dakota projects its revenue losses because of online sales that do not collect state taxes at around $50 million annually, while its opponents in the case estimate it as less than half that figure.
A decision on the case by the U.S. Supreme Court is expected to be announced in June.