States Can Charge Online Retailers Sales Tax: Supreme Court

The Supreme Court ruled on Thursday that states can charge sales tax to online retailers even if they do not have a physical presence in the state.

"This Court should not prevent States from collecting lawful taxes through a physical presence rule that can be satisfied only if there is an employee or building in the State," Justice Anthony Kennedy wrote in the opinion for the court. The vote was 5-4.

The Supreme Court ruling found that the physical presence rule in a 1992 Supreme Court case is unsound and incorrect. The case, "North Dakota v. Quill," found that states could not mandate a business to pay sales tax unless the business had a physical presence in the state. Thursday's decision overturned that ruling.

The case brought before the court involved the state of South Dakota, which enacted a law that required businesses to collect sales tax if the business delivered more than $100,000 of goods and services in the state or engaged in 200 or more separate transactions. The state sued major online retailers, Wayfair, Overstock and Newegg, which met the criteria in the law but did not collect sales tax.

This report will be updated.

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