The Supreme Court just caused stocks of online retailers to tumble

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South Dakota believed it was losing millions of dollars per year in tax revenue and passed a law requiring out-of-state vendors to charge and submit sales taxes to the state if they reached a threshold of selling $100,000 worth of goods or 200 or more separate deliveries into the state. Thanks to a 1967 Supreme Court ruling that said states couldn't force mail-order catalogs to collect sales tax unless that company had a physical location in the state, online retailers have been able to skirt the issue of collecting sales tax.

"(The prior decision) puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers", Justice Anthony Kennedy wrote for the majority.

A 5 to 4 ruling from the Supreme Court will change that, but Kevin McCarthy with the Arizona Tax Research Association says the impact won't immediately be felt in Arizona.

In response to the ruling, the stocks of several internet retailers, including Amazon, eBay and Wayfair, all dropped.

Taxes on TV services is not new. A bipartisan group of senators filed a brief in the case supporting South Dakota's effort to overturn the online sales tax ban, essentially acknowledging that the legislative body was too dysfunctional to fix the problem. However, smaller e-tailers like Newegg used to have a no-tax advantage.

"As in so many other areas, technology has evolved faster than the law and left us with at times freakish, unfair results", she said.

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The department indicated that businesses now collecting sales taxes should continue, but it is unclear when online sellers will need to begin collecting the taxes. Instead, consumers were responsible for send states the necessary taxes - something that most people never do.

Already, South Carolina expects to collect about $346 million in sales taxes from online sales in 2017-18, according to an October analysis by the state's Revenue and Fiscal Affairs Office. Chief Justice John Roberts dissented along with Stephen Breyer, Sonia Sotomayor, and Elena Kagan. "For years, this situation has resulted in substantial loss of revenue to states, thus increasing the tax burden on those who do pay the taxes they owe".

States would have to adopt laws such as South Dakota's first, which was the subject of the Supreme Court ruling (PDF).

Somewhere along the line, Amazon got so big that it now has what could be called a "physical presence" (in the form of fulfillment centers) in almost every state, and so it chose to start charging sales tax in every state that levied one. Lawmakers in the state, which has no income tax, passed a law created to directly challenge the physical presence rule.

The idea of online taxes for a long time was limited to companies who had a physical presence in that state.

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