WASHINGTON (Gray DC) -- Online shoppers may no longer be able to avoid sales tax. The U.S. Supreme Court is considering a South Dakota state law that requires online businesses charge tax.
Washington Bureau reporter Alana Austin previews this blockbuster case.
South Dakota state leaders say this law is about leveling the playing field. Opponents of such rules say let the free market decide what’s best. The Supreme Court could settle the argument soon.
A steady stream of customers come through Eric Sinclair's furniture store - Montgomery's - in Sioux Falls on any given day.
But when many find the piece they like, they skip the register for better deals online.
“I think that it really gives them an unfair advantage," said Sinclair.
One reason online retailers can offer a lower price to shoppers is because many do not charge sales tax. They argue if they don't have a physical presence, they don't owe the state sales tax.
The Supreme Court is about to decide whether that will change.
“Online-only retailers present their products as if they’re tax-free and they really aren’t and they’re taking advantage of a loophole," said Deborah White, president of the Retail Litigation Center and general counsel of the Retail Industry Leaders Association.
Bottom line - Sinclair as well as Deborah White with the Retail Industry Leaders Association say the court should level the playing field between online and traditional retailers.
“If the Supreme Court upholds South Dakota’s law it will make it very easy for other states to follow in the pathway," said White.
While the Court is set to take up the issue, Congress could take action. But GOP Senator Ted Cruz says lawmakers should stay out of the debate.
“We shouldn’t be imposing burdens and taxes and regulations - hurting small mom and pop retailers on the Internet," said Cruz.
Cruz says the Internet should be free of taxes and regulation. He says Washington meddling could stifle innovation in the online marketplace.
"The one thing that could screw the Internet up is a bunch of Washington politicians and regulators getting right in the middle of it," said Cruz.
The Supreme Court is slated to take up the case April 17th and a ruling come down by the end of June.
Those who want to see the Supreme Court side with South Dakota say it could drive billions into state coffers, boosting efforts to pay for upgrades to expensive projects like schools and roads.
Some states do require taxpayers to pony up for uncharged sales taxes when they file their individual taxes, but only a small percentage of folks do.