South Dakota is asking the justices to overturn a 1992 Supreme Court ruling that companies with no physical presence in a state are not required to collect a state sales tax on purchases. A lower court decision favored Internet retailers Wayfair Inc, Overstock.com Inc and Newegg Inc in the dispute.
In a legal brief filed on Monday with the Supreme Court, the U.S. Department of Justice said the 1992 ruling may have to be overruled because it no longer fits with the rise of modern day e-commerce in which online retailers can replicate the shopping experience of a physical store even where it has no physical property.
“A physical-presence requirement ... bears no logical relationship to current economic conditions, and imposes intolerable burdens on the states’ ability to collect tax revenue they are lawfully owed,” Solicitor General Noel Francisco said in the brief.
The U.S. Government Accountability Office estimated in a November report that states and municipalities could gain between $8 billion and $13 billion in annual revenue if they could require online retailers to collect sales tax. Forty-five of the 50 states have a statewide sales tax.
Some online retailers, including leading player Amazon.com Inc, already collect state sales tax but others do not.
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