Supreme Court Rules States Can Collect Sales Tax on Web Purchases

High court decision erases a price advantage internet merchants have had in wooing consumers from real-world stores .

States have the authority to make online retailers collect sales taxes, the Supreme Court ruled Thursday, a milestone marking e-commerce’s treatment as a mature player in a marketplace no longer defined by trips to the corner store or the shopping mall.

By a 5-to-4 vote, the court closed a loophole that helped fuel the early growth of internet sales, overruling a half-century of its own precedents that forbid states from requiring merchants to collect sales tax unless those sellers maintain a “physical presence” within the state’s borders.

The ruling likely will spell the end of an era in which consumers could avoid taxes by purchasing goods online instead of from local merchants.

Justice Anthony Kennedy, who suggested years ago that the pre-Amazon.com precedent should be updated for the digital age, wrote for a majority that defied conventional ideological lines. Liberal Justice Ruth Bader Ginsburg joined his opinion, along with conservative Justices Clarence Thomas, Samuel Alito and Neil Gorsuch.

Justice Kennedy said the “physical presence” rule, always doubtful, had become untenable. He cited studies suggesting that the court’s own “artificial, anachronistic rule” now costs states up to $33.9 billion annually in uncollected sales taxes, sapping resources for essential public services while distorting the marketplace by advantaging remote sellers over those anchored in the community.

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