IRVINE -- In a 5-4 vote on June 21, 2018, the United States Supreme Court narrowly ruled in favor of letting states collect sales tax from online retailers. Prior to the ruling, South Dakota v. Wayfair, Inc., et al. (2018), it was necessary to establish a physical presence in a state before requiring businesses to collect and remit sales tax. Proponents say the ruling will help state governments increase revenues, but opponents argue that consumers and online retailers will be harmed, particularly small merchants like sole proprietors.
Continuing, Justice Kennedy noted potential shortcomings in the former system: a product of Quill Corporation v. North Dakota (1992) and National Bellas Hess v. Department of Revenue (1967), which stood as precedent for decades – until Thursday morning. The precedents established by these cases, Kennedy wrote, effectively made "a judicially created tax shelter" – that is, a strategy to minimize tax liabilities – "for businesses that decide to limit their physical presence and still sell their goods and services to a state's consumers." Indicating that small businesses – upon which Justice Roberts warned the "burden [would] fall disproportionately" – could "seek relief" on a case-by-case basis.