A state Supreme Court ruling Thursday in South Dakota may prove a boost to Georgia’s efforts to get all retailers to collect sales taxes when they sell products online.
South Dakota officials were hoping for a quick ruling in their state Supreme Court on legislation requiring internet companies to remit sales taxes. The bill was passed as a legal challenge to a 25-year-old U.S. Supreme Court decision that forbids states from requiring retailers without a physical presence in the state to collect sales taxes.
The South Dakota court ruled against the state law Thursday, setting up an appeal to the U.S. Supreme Court. Advocates for in-store retailers say the decision opens the door for the U.S. Supreme Court to reconsider its earlier ruling, which predated modern e-commerce.
Officials in many states have been looking to the U.S. Supreme Court to reconsider the issue.
That includes lawmakers in Georgia, where the state House this year passed legislation that would force online retailers with at least $250,000 or 200 sales a year in the state to either collect and remit sales taxes on purchases or send “tax due” notices each year to customers who spend at least $500 on their site.
Copies of the notices would go to the state Department of Revenue so it would know who owes at least some of the taxes. The proposal stalled in the Georgia Senate. Legislation has a two-year shelf life in Georgia, so it remains alive for the 2018 session.
“This is not a new tax, it is a mechanism to collect an existing tax,” state House Ways and Means Chairman Jay Powell, R-Camilla, said when he was pushing the bill earlier this year. “The tax is already owed.”
Some online retailers, such as Amazon.com, agreed to collect sales taxes after some prodding by the state.
If the General Assembly passes a bill during the 2018 session and the U.S. Supreme Court rules in favor of South Dakota’s measure, it could mean big money for state and local governments.
A state fiscal analysis suggested collecting those taxes could mean an extra $274 million in revenue for the state and $200 million for local governments. The combined figure could hit $621 million by 2022.
Owners of retail stores — who have a lot of political clout at the Capitol — have long said they are handicapped by the fact that they have to charge state and local sales taxes on what their customers buy while many online businesses don’t. But online retail trade groups say the Georgia proposal raises privacy concerns if retailers have to report sales they make to the Department of Revenue.