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South Dakota wins: Say goodbye to tax-free online shopping

The ruling is in! The U.S. Supreme Court decided on South Dakota v. Wayfair Inc. that states can require online retailers to collect sales taxes, signaling what could be the end of tax-free online shopping.

Previously, Quill v. North Dakota precluded states from requiring interstate retailers to collect and remit sales and use tax on sales made to in-state customers unless the retailer had a ‘physical presence’ within the state. Wayfair tosses this standard, giving states the power to set how and when online retailers must collect and remit sales and use taxes within the state.

With state governments now liberated from the physical presence test, states are expected to take a hard look at their laws to see how they compare to South Dakota and what might change. Already, 31 states have laws taxing internet sales, according to the Tax Foundation.

The South Dakota law bars retroactive application of collection responsibility but other states may not follow suit. We'll keep you posted on developments here.

Read more on business impact: Supreme Court cliffhanger: What Wayfair means to businesses?

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Judy Vorndran can be reached at jvorndran@taxops.com or 720.227.0093. Follow Judy on LinkedIn.

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