Brick and Mortar Retail Scores Win in Supreme Court Battle with Ecommerce Shops
The state of the internet has fundamentally changed the face of nearly every industry—none mores, arguably, than retail. The Supreme Court recognized as much and handed down a decision this week that gives brick and mortar stores the slightest bit of validation in their continued battle with ecommerce-only platforms.
As previously reported, the case South Dakota v. Wayfair asked the court to review a previous Supreme Court ruling from 1992 that outlined how states and other localities could tax goods sold outside of their borders. Initially intended to regulate the catalog-based retailer. The ruling has been challenged again and again over the years as retailers and states sought their fair shake against online-only shops.
The 1992 ruling allowed for the collection of sales tax by states and localities as long as the online seller had a physical presence within that specific state. Times and technology have very much changed since 1992, however, which is part of the reason the court opted to overturn that ruling this week.
“The internet’s prevalence and power have changed the dynamics of the national economy,” Justice Kennedy wrote in the Court’s ruling. “The expansion of e-commerce has also increased the revenue shortfall faced by States seeking to collect their sales and use taxes, leading the South Dakota Legislature to declare an emergency.”
Justice Kennedy went on to cite some $33 billion in sales tax revenue each year that states have missed out on.
The most telling piece of evidence from the Court’s ruling, however, is how internet access has evolved over the past 26 years. In 1992, less than 2 percent of Americans had access to the internet compared to nearly 90 percent today. Last year, ecommerce sales totaled more than $453 billion, or roughly 10 percent of the total U.S. retail sales. That’s up from 0.2 percent in 1998.
“Retailers have been waiting for this day for more than two decades,” NRF President and CEO Matthew Shay said in a statement in response to the ruling. “The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well. This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.”
Shay went on to say that there’s still work that needs to be done, urging Congress to follow the Court’s lead and pass legislation implementing uniform national rules that provide “consistency and clarity for retailers across the country.”