On top of the convenience factor, online shopping has long boasted another advantage for the budget-minded consumer: tax-free purchases.
On Amazon, for instance, a downpour-drenched Prime member in New York City could purchase a pair of full-price Hunter rainboots from a third-party seller for $150 flat; if they walked to a local store, they’d pay $163.31, factoring in both the state and city taxes, the latter of which is triggered by purchases over $110. E-commerce sites aren’t obligated to collect sales taxes in states where they don’t have a physical presence, such as a warehouse or brick-and-mortar shop, so while Amazon pays up for goods it sells from its own inventory in all 45 states that require them, on its third-party marketplace, which accounted for $32 billion in sales last year, merchants often don’t.
This could change, however, as the Supreme Court is set to hear arguments beginning this week on a case brought by South Dakota against online retailers including Wayfair Inc., Overstock.com Inc. and Newegg Inc. (Amazon is not a party to the case, though President Donald Trump has continued his efforts to single out the e-commerce behemoth for its tax payments, among other practices.)
According to the Government Accountability Office, states could have collected an extra $13.7 billion in taxes in 2017 if online purchases were accounted for. Many contend that the current rules, which stem from the 1992 decision in Quill v. North Dakota, a case concerning a mail order retailer, aren’t relevant to the modern e-commerce era and end up hurting local brick-and-mortar business.
Etsy Inc., eBay Inc. and other retailers, meanwhile, have filed amicus briefs opposing the proposed changes, reasoning that state and municipal tax rules are so complex that complying with them would be debilitating to small sellers. Instead, some argue, the change should come from Congress, which would have the power to pass national regulations.
Arguments for the case begin on Tuesday, and a decision is expected in June.