Published: Fri, June 22, 2018
Money | By Ethel Goodwin

Supreme Court affirms privacy rights of cellphone users in 'Big Brother' case

Supreme Court affirms privacy rights of cellphone users in 'Big Brother' case

The case challenges South Dakota's application of its sales tax to internet retailers who sell into South Dakota but have no property or employees in the state.

The retailers refused to collect sales tax - citing a 1992 law that prohibited states from collecting sales tax from retailers that did not have a "physical presence" in their state, such as a store, warehouse or sales representatives.

"Each year, the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States", Justice Kennedy wrote in his Court Opinion.

Many retailers, such as Amazon, Apple, Walmart, and Target, were already collecting sales taxes even if they didn't have a brick-and-mortar retail space in a state.

In a statement, Wayfair said it did not expect the ruling to have "any noticeable impact on our business", since it already collects state taxes on roughly 80 percent of orders.

Shares in online retailers like Amazon.com (amzn), Wayfair (w), Etsy, (etsy) Overstock.com (ostk) and eBay (ebay) all fell in the wake of the decision. Consumers were supposed to voluntarily pay sales taxes on remote purchases, although it rarely took place. Quill determined how state taxes worked with e-commerce from the web's first days.

Dominic Calabro, president of Florida TaxWatch, a business-oriented advocacy group, said the ability to apply the sales tax to more internet sales will keep the state's tax structure in sync with the evolving economy. Justice Anthony M. Kennedy wrote the majority opinion, joined by Justice Ruth Bader Ginsburg and the court's three most conservative justices.

"It's going to be very hard for New Hampshire-based businesses to comply with this", she said. Customers were generally responsible for paying the sales tax to the state themselves if they weren't charged it, but most didn't realize they owed it and few paid. This will add a new layer of complexity for small businesses that were previously selling without sales tax, but the specific rules will vary by state. If a business had a physical presence in a state, then they could be forced to collect sales tax at the time of purchase.

"Rejecting the physical presence rule is necessary to ensure that artificial competitive advantages are not created by this court's precedents", Kennedy said. The conservative chief justice, John Roberts, dissented along with liberals Stephen Breyer, Sonia Sotomayor and Elena Kagan. North Dakota, which prevented states from collecting these taxes.

"With the appropriate action by the Legislature and Florida Department of Revenue, not only will the state be able to collect the sales and use tax that has always been legally due, but Floridians will no longer be unknowingly breaking the law".

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