The battle over sales taxes on online purchases heads to Supreme Court

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Should you pay sales tax on your online purchases?

Chances are not bad you already do, even though the law requires online retailers to collect the tax only in states where they have a physical presence.

Amazon (AMZN) as well as Walmart (WMT), two of the giants of online retailing, collect sales tax on all their sales inside the 45 states that will have a statewide sales tax.

yet many various other smaller retailers don’t collect sales tax unless they have a physical presence inside the state where the buyer lives, relying on a 26-year old Supreme Court decision that will was related to catalog retailers. Many of the sales on Amazon’s as well as Walmart’s sites are actually done by smaller retailers using those sites as their platform. For example, Amazon says half of the sales on the site are by little as well as medium size retailers.

On Tuesday the Supreme Court will be hearing arguments whether to overturn its 1992 decision when This specific hears a fresh case focused on online purchases, South Dakota vs. Wayfair.

A reversal could mean that will all online retailers must collect sales tax everywhere. This specific’s an issue that will brick-as well as-mortar retailers insist will provide a level playing field with online competitors, as well as help to provide state as well as local governments with the tax revenue they deserve.

“The current tax system favors online retailers over brick-as well as-mortar businesses, as well as undermines fair as well as open competition inside the marketplace,” the National Retail Federation argues in a brief This specific filed inside the case.

President Donald Trump has claimed Amazon doesn’t collect sales taxes, even though the company does.

The Trump administration will join the oral argument in favor of online retailers being required to collect sales taxes everywhere.

Those fighting the change say that will This specific would likely impose an undue burden on little retailers who would likely owe not just state sales taxes yet local sales taxes that will many states as well as counties also impose. Wayfair argues more than 16,000 different taxing units could demand sales tax collections.

Related: Trump vs. Amazon: Let’s set the record straight

South Dakota says This specific will be looking to start collecting taxes only for future online sales, yet yet Wayfair’s attorneys argue in court filings that will many various other states as well as local governments could demand years of back sales taxes, forcing retailers to go through costly audits of past sales as well as make back payments that will could bankrupt some companies.

Related: Amazon vs. Walmart – Rest of retail fights for crumbs

“South Dakota’s choice to forego its remedy for back taxes inside the event that will the Court were to overrule [existing law] will not limit the retroactive application of such a ruling with respect to various other state as well as local jurisdictions,” said Wayfair’s attorneys.

as well as while the issue will be portrayed as one of fairness for little brick-as well as-mortar retailers that will have to compete against online retailers, experts say those little retailers could be among the ones that will get hurt.

Many little retailers depend on online sales. If they have to start complying with the complexities of collecting as well as remitting sales taxes nationwide, many could be forced to abandon that will part of their business.

“Those smaller retailers are currently starting to see an ability to compete with the big guys like Amazon as well as Walmart,” said Sam Cinquegrani, CEO of ObjectWave, a digital strategy as well as services firm. “currently This specific might be something else that will will be going to take them back a step.”

CNNMoney (fresh York) First published April 15, 2018: 3:35 PM ET

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