CHARLESTON — The U.S. Supreme Court ruled last month that out-of-state retailers can collect state sales tax from customers, a decision opposed by West Virginia Gov. Jim Justice.
The decision was in South Dakota v. Wayfair, in which states alleged that they were losing out on billions of dollars every year because of online shopping.
The previous ruling involving online shopping said that unless a company had a physical presence in a state, it did not have to collect sales tax.
“When I took office and our state was struggling financially. At that desperate time, I might have considered supporting legislation to enforce West Virginia sales tax on out-of-state transactions," Justice said in a statement. "However, now I do not support adding additional taxes on our people in this manner."
Justice said that legislation would have to be passed to authorize the state to enforce the collection of out-of-state sales taxes.
"With our state’s growing economy, I don’t want to reach into West Virginians' pockets when we don’t need to," Justice said.
The Wayfair appeal was argued April 17, and the Supreme Court justices issued their 5-4 ruling June 21.
Justice Anthony M. Kennedy authored the majority opinion and was joined by Justices Ruth Bader Ginsburg, Clarence Thomas Samuel A. Alito Jr. and Neil M. Gorsuch.
Justice John G. Roberts Jr. dissented and was joined by Justices Stephen G. Breyer, Sonia Sotomayor and Elena Kagan.
Under the former law, National Bellas Hess Inc. v. Department of Revenue of Illinois and Quill Corp. v. North Dakota, a state may not require a business that has no physical presence in the state to collect its sales tax. However, because of this law, South Dakota was losing between $48 million and $58 million each year, according to the opinion.
South Dakota enacted a law that required out-of-state sellers to collect and remit sales tax as if the seller had a physical presence in the state, due to a loss of sales tax in the state and critical funding the state had previously received.
Wayfair, Overstock.com and Newegg argued that they had no employees or real estate in South Dakota and they did not collect the state’s sales tax, as per the Bella Hess and Quill suits.
South Dakota then filed a lawsuit in state court against the online retailers, seeking a declaration that the law it had enacted was valid and applicable to the respondents. It also filed an injunction requiring respondents to register for licenses to collect and remit the sales tax.
The respondents sought summary judgment, arguing that the South Dakota law was unconstitutional and the trial court granted their motion.
The South Dakota Supreme Court affirmed on the ground that Quill is controlling precedent and the case was appealed to the U.S. Supreme Court via a writ of certiorari.
"We put Bellas Hess and Quill to rest and rightly end the paradox of condemning interstate discrimination in the national economy while promoting it ourselves," Kennedy wrote.
In his dissent, Roberts said the tax burden will fall disproportionately on small businesses.
"One vitalizing effect of the Internet has been connecting small, even 'micro' businesses to potential buyers across the Nation," Roberts wrote. "People starting a business selling their embroidered pillowcases or carved decoys can offer their wares throughout the country — but probably not if they have to figure out the tax due on every sale."
Roberts wrote that he would let Congress decide whether to depart from the physical presence rule.
