Supreme Court's Wayfair tax decision sidelines Quill

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The Supreme Court justices ruled 5-4 that states could collect sales tax from internet sales.

For this case, South Dakota v Wayfair Inc., Justice Ruth Bader Ginsburg joined Justices Samuel Alito, Neil Gorsuch, Anthony Kennedy, and Clarence Thomas to deliver the majority opinion. All three companies sold online merchandise in the state, but did not have a physical location or employees there, and were exempted from collecting sales tax from their South Dakota customers.

The court chose to overturn a 1992 decision that a physical presence was necessary to require retailers to collect and send sales taxes to a state.

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The decision is a big win for major corporations such as Apple and Walmart, who generally pay sales tax due to their "physical presence" in most states throughout the country. The ruling could easily improve revenue in states that have taken a hit from online sales.

A Government Accountability Office audit said states missed out on about $13.7 billion in tax revenue in 2017. The conservative chief justice, John Roberts dissented along with liberals Stephen Breyer, Sonia Sotomayor and Elena Kagan.

But sellers that only have a physical presence in a single state or a few states have been able to avoid charging customers sales tax when they shipped to addresses outside those states. Although technically consumers are required to pay sales tax on all purchases, it is practically impossible to collect without the retailer applying it at the point of sale.

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The Trump administration backed South Dakota in the case, arguing that no one could have foreseen how rapidly e-commerce would expand. Forty-five of the 50 states impose sales taxes.

In response to the ruling, the stocks of several internet retailers, including Amazon, eBay and Wayfair, all dropped.

Internet companies opposed to the South Dakota law appealed.

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Wayfair (W), Etsy (ETSY) and eBay (EBAY) all dipped in early trading Thursday immediately following the ruling. South Dakota's governor has said his state loses out on an estimated $50m a year in sales tax that doesn't get collected by out-of-state sellers.