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Baker Botts Tax Partners Talk SCOTUS State Sales Tax Ruling on Online Retailers

Media Alert
HOUSTON, June 21, 2018 - In a 5-4 decision, The U.S. Supreme Court ruled states can require out-of-state online retailers to collect sales tax. This is a major change overturning Quill—a 1992 “pre-internet” SCOTUS court ruling that exempted merchants from collecting sales tax on online purchases unless the merchant had a physical presence in its customer’s state.

What does this mean for state tax?

This decision is a win for states that impose sales tax; it makes sales tax administration less difficult and should address claims that online retailers’ tax-free web sales were impinging on state revenue. The decision is also a big win for “brick-and-mortar” stores, some of which were suffering from unfair competition by online merchants who could advertise “tax-free” sales.

Several states have already enacted laws in anticipation of this ruling. We expect that most others will follow suit as soon as they are able. While this decision focused on online companies, all multi-state merchants will be forced to review their sales tax withholding procedures for out-of-state sales.

Baker Botts State and Local Tax partners are able to comment on this SCOTUS ruling. To schedule an interview, please contact Sheena Cochran ([email protected]).


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