States can now force you to pay online sales tax

The Supreme Court rules against Wayfair and other online retailers and overturns ban on the collection of online sales taxes. Jenny Kane  AP

States may require online retailers to collect sales taxes, the Supreme Court ruled Thursday.

The U.S. Supreme Court on Thursday ruled in favor of states being able to force retailers to collect sales taxes no matter where the seller operates its business.

The high court ruled Thursday to overturn those decisions.

The case, which we first told you about in April, was over a South Dakota law which requires retailers, regardless of where they are, to collect and pay sales tax.

The court chose to overturn a 1992 decision that a physical presence was necessary to require retailers to collect and send sales taxes to a state. 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. 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.

Amazon, by far the nation's largest online seller, is not a party to the case, since it now has a physical presence in many states, with warehouses, and pays the taxes.

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In truth, this doesn't have much impact on Amazon, which has been collecting sales tax across the country since a year ago.

It ruled that the provision amounted to a "judicially created tax shelter" that put some companies at an advantage. The conservative chief justice, John Roberts dissented along with liberals Stephen Breyer, Sonia Sotomayor and Elena Kagan. Online sellers that haven't been charging sales tax on goods shipped to every state range from jewelry website Blue Nile to pet products site Chewy.com to clothing retailer L.L. Bean.

Some states will still have to pass new legislation to demand tax from out-of-state orders, and that isn't always guaranteed.

President Donald Trump has also criticized Amazon, whose founder Jeff Bezos also owns the Washington Post, saying that it does not collect any sales tax. After the decision was announced, shares in Wayfair and Overstock both fell, with Wayfair down more than 3 percent and Overstock down more than 2 percent.

South Dakota has estimated that it could take in up to $50 million a year in additional revenue with these taxes being collected.

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