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U.S. Supreme Court struggles with e-commerce sales tax case

Reuters  |  WASHINGTON 

By Lawrence Hurley

WASHINGTON (Reuters) - The U.S. on Tuesday appeared hesitant to let states force to collect sales taxes on purchases, with some of the justices saying would be best suited to resolve the matter.

The nine justices heard a one-hour argument in the closely watched case pitting South Dakota, backed by Donald Trump's administration, against businesses, a fight potentially worth billions of dollars that could affect states' coffers and consumers' wallets.

The justices heard the case against a backdrop of Trump's criticism of Inc, the in online retail, on the issue of taxes and other matters.

asked the justices to overturn a 1992 precedent that states cannot require retailers to collect state sales taxes unless the businesses have a "physical presence" in the state. , and are contesting South Dakota's authority to collect the taxes, and won in the lower courts.

Some of the justices appeared to agree with the companies that a ruling striking down that precedent in a case called v. would lead to a scramble among states to pass their own laws that could impose varying burdens on small businesses.

"is capable of crafting compromises and trying to figure out how to balance the wide range of interests involved here," Justice said.

Along similar lines, Justice said the questions raised in the case are "wrought with difficulties."

It remained unclear how the court will rule. Some members of the court, including the often-pivotal Justice and Trump's appointee Neil Gorsuch, appeared sympathetic to


"Why should this court favour a particular business model?" Gorsuch asked, in reference to companies that do not collect taxes.

Kennedy said the 1992 decision has been "proven incorrect" and indicated it is the court's responsibility to overturn it rather than waiting for to act. Justice made a similar point, saying that it was not Congress' job "to overturn our obsolete precedent."

But cited court filings saying the problem is seeking to resolve may be lessening because many of the biggest online retailers, like Amazon, now collect state sales taxes.

"And if it is, in fact, a problem that is diminishing rather than expanding, why doesn't that suggest that there (is) greater significance to the arguments that we should leave Quill in place?" Roberts asked.

Justice said a ruling favouring could embolden states "tottering on the edge of insolvency" to seek to collect as much sales tax as possible by targeting out-of-state businesses.

A ruling favouring could eventually lead to paying more for many purchases. Such a ruling could help small brick-and-mortar retailers compete with while delivering up to $18 billion in tax revenue to the affected states, according to a 2017 federal report. The justices are due to decide the case by the end of June.

depends more than most states on sales taxes because it is one of nine that do not have a state income tax. projects its revenue losses because of that do not collect state taxes at around $50 million annually.

Amazon, which is not involved in the case, collects sales taxes on direct purchases on its site but does not generally collect taxes for items sold on its platform by third-party vendors, amounting to about half of total sales. Two states recently enacted laws requiring such collections.

Trump has assailed Amazon Jeff Bezos, who owns the Washington Post, a newspaper that the Republican also has disparaged.

is supported by industry groups representing major retailers that have brick-and-mortar stores that already collect state sales taxes. The National Retail Federation, which supports the state, has a membership that includes Walmart Inc, Target Corp and Amazon.

companies supporting Wayfair, Overstock and Newegg include two that provide for individuals to sell online: eBay Inc and Etsy Inc.

The 2016 law requires to collect sales tax if they clear $100,000 in sales or 200 separate transactions. The state sued a group of to force them to collect the sales taxes, with the aim of overturning the 1992 precedent.

(Reporting by Lawrence Hurley; Editing by Will Dunham)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, April 18 2018. 00:45 IST