The shape of commerce is changing and the U.S. Supreme Court has updated the state tax nexus standard in South Dakota v. Wayfair to reflect those changes in the marketplace. We now have a pathway to reach a sustainable sales tax system for brick-and-mortar and internet sellers who are no longer exempt from collecting sales tax simply because they do not have a physical presence. Of course, this is not a new tax as state tax statutes have always held that the tax on the purchase is still owed by the consumer, under what is known as a use tax. Because many consumers were unaware of this obligation and enforcement by the states was impossible the Supreme Court recognized that there was a misconception advertised by some online sellers that internet purchases were tax-free. That charade has been ended through the Supreme Court ruling in South Dakota v. Wayfair.

Not only will this new standard allow for business to compete fairly, but it will also restore states’ authority over their tax base and budget. According to various studies, states were estimated to have lost $13 billion - $26 billion annually. As internet sellers have exploited the judicially created tax loophole, community-based stores have been at a distinct pricing disadvantage.  The Wayfair decision creates a pathway to end this competitive disadvantage.

The marketplace continues to evolve and we are seeing exciting opportunities for collaboration between online and physical retail.  The Wayfair decision will remove the artificial barrier between these sales models, because customers will no longer be led into erroneously thinking that they can avoid the sales tax. At the end of the day, merchants should be able to compete on attributes such as price and customer service, not government-imposed sales taxes.

The Court also pushed aside the decades old premise that figuring out multiple sales taxes is far too complicated for an online seller. Today, technology allows consumers to shop through mobile devices and retailers to easily calculate shipping charges and tax rates, while making product recommendations based on shopping behavior. With a marketplace that now exists online and across the street, we need tax policies that reflect this modern retail environment, as well as protect consumers who use and benefit from the multiple retail channels. It is time for a sales tax system that supports our 21st Century marketplace.

Thank you to the US Supreme Court and we look forward to working with the states to implement responsible remote sales tax collection policies.