South Dakota v. Wayfair Decision Brings Overdue Fairness to Retail Sales Tax

Following is a statement by Carl Davis, research director at the Institute on Taxation and Economic Policy, regarding the Supreme Court’s decision in South Dakota v. Wayfair. Mr. Davis has authored numerous policy briefs regarding how online retailers that fail to collect sales taxes deprive states of necessary sales tax revenue and maintain an unfair advantage over bricks and mortar retailers.

“This is an important decision that will help bring sales taxes into the digital age.  State and local governments now have more leeway to modernize their sales tax systems and collect the tax when their residents order items online.

“For decades, the federal government has hamstrung states that attempted to require out-of-state Internet retailers to collect sales tax on items purchased online.  If, for example, an Internet retailer had no bricks and mortar store or warehouse in a state, it typically didn’t have to collect sales tax. This gave online retailers an unfair market advantage and deprived state and local governments of sales tax revenue. But those days are finally over. This ruling is a necessary blow to large online retailers that have avoided tax collection to keep a competitive advantage over local businesses.”

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