Supreme Court rules in 5-4 decision that states "can" collect sales tax on internet purchases

The Supreme Court has narrowly determined that state and local governments can impose taxes on online (and other e-commerce) purchases shipped from another state. This directly overturns a tax-related judgement from 26 years ago.

The Supreme Court narrowly sided with South Dakota state law

In 1992, judges ruled in Quill v. North Dakota that a company must have a physical presence in the state for the government to collect a tax on purchases shipped to that state. For instance, if you purchase something on Etsy, the seller must have a presence in your state for taxes to be collected.

In a 5-4 ruling today in South Dakota v. Wayfair, the Supreme Court determined that this previous decision was incorrect. Now, as stated in the opinion, this determination is not an all-encompassing decision and specifically applies to South Dakota state laws regarding e-commerce taxation. However, the decision does open the door for more state and local governments to pursue simplified tax codes to collect taxes on "imported" purchases.

In addition, the ruling today does open the door for congress to look in to existing tax structure for e-commerce and interstate sales. It is certainly much too soon to determine the extent to which this ruling can go as far pricing increases (to compensate for taxes) and online purchases. However, as someone that works in interstate sales and shipments, I am greatly curious to see the effect this ruling has on businesses.

See the full majority opinion, authored by Justice Anthony Kennedy, here