Our view: A victory for the little guys
Herald editorial board
The decision by the U.S. Supreme Court will neither make nor break any state's budget. But after the court declared, in a 5-4 decision, that state governments can force online businesses to collect sales tax, retail fairness now is the law of the land, and it might be the difference for a small retailer in Anytown USA.
By now, it's an oft-told tale, but one that has deep roots in the Dakotas. It started with the 1992 Supreme Court case of Quill v. North Dakota, which ruled states cannot collect sales taxes from retailers that do not have a physical presence in that state. The case came at an inopportune time — 1992 was a time of mail-order sales, and most Americans had never even heard of the internet, let alone the concept of shopping online.
Without the burden of charging sales taxes, online sellers gained an advantage over stores on America's main streets. The local businesses pay property taxes, pay local employees and generally do all of the things that support a community.
Remember that North Dakotans were always supposed to be paying sales tax on online purchases. It was an honor system—consumers were expected to remit taxes to the state. Of course, very few people ever did this. On personal purchases, we never did.
The issue that started in North Dakota in 1992 ended with a case brought by South Dakota. That state intentionally forced the issue, passing a state law that requires retailers with more than $100,000 in annual sales (or 200 transactions) in the state to pay sales taxes at a rate of 4.5 percent. It led to a challenge that became South Dakota v. Wayfair, which the Supreme Court decided this week.
Dozens of other states and President Trump threw support behind South Dakota. This week, when the court decided in favor of the states, the president declared: "Big victory for fairness and for our country. Great victory for consumers and retailers."
Although some of the largest online retailers already collect sales taxes in most states, the Washington Post reports the old system was costing states $8 billion to $33 billion in uncollected taxes each year.
Forum News Service reports that the new rule could bring in $150 million to $200 million in Minnesota and up to $50 million in North Dakota. Considering the enormity of their overall state budgets, that's not going to make those states flush with cash, but the revenue will be welcome nonetheless.
The money to states shouldn't matter anyway. What does matter is creating fairness across the board for all businesses, and putting huge out-of-state retailers on the same plain as the smallest mom-and-pop store in the smallest town.
The court's decision will reverberate and many are surprised the court sided with the states. It's not often the court overturns precedent. Justice Anthony Kennedy, in his ruling, wrote that earlier decisions led to "a judicially created tax shelter."
And it's good that it's finally going to change. It's a victory for the little guys.