Frost & Associates, LLC
Call Today 202-618-1873

SCOTUS rules in favor of online tax — what’s next for businesses?

The Supreme Court of the United States (SCOTUS) agreed to allow states to impose a tax on online transactions in the recent case South Dakota v. Wayfair.

Why is the ruling important? In order to move forward with this change, SCOTUS had to overturn two previous decisions, one in 1967 and one in 1992. These rulings led to a required physical presence rule in order for a state to tax a business. If a business did not have a physical presence in a state, the state could not tax the business.

This is no longer the case.

In South Dakota v. Wayfair, the state successful argued for a change. Ultimately, Justice Anthony Kennedy was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito and Neil Gorsuch in stating the physical presence rule was wrong from the beginning and that the “internet revolution has made its earlier error all the more egregious and harmful.”

Can states start taxing businesses at any time? In short, no. States still need to meet certain requirements before they can tax a business. Most notable, the court pointed out that states should avoid “excessive compliance burdens on out-of-state sellers.” Anything viewed as excessive could face a challenge in court.

What will happen next? States will likely begin imposing taxes on these transactions. Unless Congress acts to set rules on how states impose such a tax, it is very likely a business will take the state to court based on a tax dispute over what is and is not an excessive compliance burden will result.

No Comments

Leave a comment
Comment Information
Every Tax Problem Has A Solution

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Contact us today!

Frost & Associates, Attorneys at Law
1629 K Street NW, Suite 300
Washington, D.C. 20006

Phone: 202-618-1873
Phone: 202-505-6959
Fax: 888-235-8405
Washington Law Office Map

Columbia Office
10440 Little Patuxent Parkway, Suite 300
Columbia, MD 21044

Phone: 202-618-1873
Phone: 202-505-6959
Fax: 888-235-8405
Columbia Law Office Map

Annapolis Office
888 Bestgate Road
Suite 400
Annapolis, MD 21401

Phone: 202-618-1873
Phone: 202-505-6959
Fax: 888-235-8405
Map & Directions

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031

Phone: 202-618-1873
Phone: 240-599-5009
Phone: 202-505-6959
Fax: 888-235-8405
Map & Directions

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850

Phone: 202-618-1873
Phone: 703-621-7169
Phone: 202-505-6959
Fax: 888-235-8405
Map & Directions

Google+
Find us on...
  • Facebook
  • Twitter
  • Linked In