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Looming before the Supreme Court: sales-tax issue

On Behalf of | Sep 22, 2017 | Business Litigation |

Diverse businesses in New York and all across the country are daily focused upon tax-related matters that affect their enterprises.

Those issues are of course complex and many, given the intersection of local, state and federal tax rules and policies, and inattention or the wrong move made by a commercial entity can result in tax-driven business litigation.

One recent tax matter of material note and interest recently reported by the national publication Bloomberg highlights a business matter relevant to enterprises across the country, namely, their duty to collect sales taxes from customers buying goods and remit them to state authorities.

As Bloomberg notes, so-called “brick-and-mortar” retail stores – those with physical presences in malls and other locales – have historically done that.

Online retailers, though, don’t have the duty to do so, and haven’t since a 1992 U.S. Supreme Court ruling “forbade states from requiring retailers without a physical presence to collect sales tax.”

The implications of that ruling are now huge, given the shifting contours of the country’s retail landscape. While many on-site stores across the country are feeling pinched these days, profits for online entities like Amazon are skyrocketing.

And, while online sales continue to ratchet up, states continue to be shut out on sales-tax collections by virtue of the Supreme Court’s ruling.

Critics of that ruling hope to see it reversed, given the new realities of the marketplace. Bloomberg notes that, “A decision forcing online retailers to collect such taxes could be worth billions in revenue to state and local governments.”

Legislators in one state have gone so far as to craft a law that directly and intentionally contradicts the high court’s 1992 ruling, and they have cited that statutory enactment to bring online retailers to court. Bloomberg notes that the law “was specifically drafted so that the state’s highest court could quickly reject it and send it up for U.S. Supreme Court review.”

That is precisely what has happened, with a question now remaining as to whether SCOTUS will take the case on appeal and, as critics of the 1992 case hope, craft new law that would result in a uniform sales-tax collection scheme for all retailers.

We will be sure to keep readers timely informed of any material developments that occur in the matter.