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Supreme Court decides in favor of sales tax fairness

In a 5 to 4 vote, the U.S. Supreme Court earlier this month upheld sales tax fairness by ruling that states could compel out-of-state online sellers to collect and remit sales taxes to states where the customers live.

A 1992 High Court ruling had allowed out-of-state online sellers to forgo collecting sales taxes owed to the states unless the seller maintained a physical presence where the customer lived.  A Supreme Court majority argued that the former standard was out-of-date and imposed an unfair tax burden on traditional brick-and-mortar retailers while allowing online sellers an unfair price advantage.

The ruling was widely recognized as a big win for brick-and-mortar retailers and state coffers across the nation. Traditional stores increasingly had been losing market share and stability to online sellers while states were unable to collect sales taxes that were due to them.

The decision capped more than a 20-year effort to correct for an online price advantage that traditional retailers increasingly saw as unfair. The status quo threatened the livelihoods of businesses that were charging sales taxes while giving online sellers a leg up with customers.

In various media reports in reaction to the ruling, WRA Senior VP of Government Affairs Mark Johnson hailed the ruling as a boost for stores that had been losing market share to online sellers.

“We think this is a matter of fairness and open competition,” Johnson told The Lens, the online news source of the Business Institute of Washington.

Early estimates are that the ruling could mean an additional $298 million to $453 million in new annual revenues to the State of Washington. While not a windfall for a state in the midst of spending a $43.7 billion two-year budget, budget officials will welcome the added revenue.

Groups including the National Retail Federation, Retail Industry Leaders Association and Opportunity Washington joined WRA in praising the ruling.

Further decisions now can be made in states as to how they want to collect sales taxes owed to them by out-of-state online sellers.

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