Major Win for Retailers: SCOTUS Rules Online Sales Tax Collection Allowed


Level Playing Field Set to Become Reality

Retailers can rest easier tonight knowing that a level playing field for brick-and-mortar stores with their out-of-state competitors is now within reach.

In a decision handed down today in the South Dakota v. Wayfair case, the U.S. Supreme Court upheld a 2016 South Dakota law that requires online merchants with more than $100,000 in annual sales to state residents, or 200 transactions with state residents, to collect sales taxes.

The 5-4 decision overturns earlier decisions in both the Quill Corp. v. North Dakota and National Bellas Hess Inc. v. Department of Revenue of Illinois cases. Today’s decision recognizes that the earlier decisions caused “a judicially-created tax shelter for businesses that limit their physical presence in a state, but sell their goods and services to the State’s consumers…”

“The need for a level playing field is vital to the success and future of retail,” Tod Griffin, Kentucky Retail Federation (KRF) president said. “As the industry continues to change and retail takes on new forms, it is important sales tax laws keep up with the modern channels of commerce. This decision gives Kentucky retailers the ability to compete in today’s marketplace.”

At the urging of KRF and in anticipation of a favorable ruling, the Kentucky General Assembly added language to tax reform legislation enacted in the 2018 session that would require collection of the state sales tax by remote sellers under the same terms as in the South Dakota law.

“Kentucky retailers are grateful for the state legislature’s forethought in including online sales tax collection language as part of 2018 tax reform, anticipating a fair ruling in the South Dakota v. Wayfair case,” Griffin said. “Not only is this a win for the retail industry, but for state revenues as well.”

The Kentucky Retail Federation is the "Voice of Retailing" throughout the Commonwealth, representing retailers of all types and sizes since 1939. From Main Street to the mall, retailers enhance Kentucky's communities and provide a better quality of life for Kentuckians everywhere. Kentucky's retail industry employs over 400 thousand Kentuckians and pays more than $10 billion in wages annually. Retailers collect over $2.8 billion in state sales tax and pay millions in other taxes to state and local governments.

Sarah Rowlette