Supreme Court Ruling is Right Step Forward for Digital Economy, ITIF Says; Cautions Against State Efforts to Unduly Burden E-Commerce

June 21, 2018

WASHINGTON— In response to the Supreme Court decision today in South Dakota v. Wayfair, Inc. the Information Technology and Innovation Foundation (ITIF), the leading science and tech policy think tank, issued the following statement from Vice President Daniel Castro:

There has been a growing need to reform the existing system for collecting sales taxes from online and out-of-state retailers so that it is fair and simple for businesses and consumers to comply. Congress has had many chances to address this issue, but it has failed to act decisively to resolve this problem. During this time, states have struggled to collect sales tax revenue from many online businesses and consumers even as these states have worked together to simplify and harmonize their sales tax systems.

Today, the Supreme Court has ruled that states may require out-of-state businesses to collect sales tax on consumers even if they do not have a physical presence. This ruling ensures that major online businesses cannot operate as virtual sales tax havens, allowing consumers to avoid paying their fair share of sales taxes and unfairly competing with other online and brick-and-mortar retailers. The ruling is the right step forward for the digital economy. E-commerce has grown up.

However, not all states have participated in the efforts to streamline their sales taxes systems. Moreover, states have a history of enacting laws and regulations that discriminate against online businesses to boost local businesses. Congress should continue to monitor and resist any attempts by states to place undue burdens on e-commerce, and policymakers should encourage states to streamline their sales tax systems before requiring out-of-state sellers to collect sales taxes so as to minimize compliance costs, which will ultimately be passed on to consumers.