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The New York Times reports this morning that “a closely divided Supreme Court struggled on Tuesday to decide whether internet retailers should have to collect sales taxes in states where they have no physical presence.”

The state of South Dakota is asking the court to reverse a precedent set by the Court in 1992, when it ruled that states could only require online retailers to collect sales taxes if those retailers have a physical presence in those states.

South Dakota has the Trump administration on its side; President Trump has been accusing Amazon of not paying enough tax. (Amazon is not involved in the South Dakota case.) If the Court sides with South Dakota, the expectation is that it would better enable small bricks-and-mortar retailers to compete with larger online entities, as well as funnel billions in taxes to the states.

The Times writes that “by the end of arguments on Tuesday, it was not clear whether there were five votes to overrule the 1992 decision … Several justices expressed concerns about imposing crushing burdens on small businesses that sell goods on the internet and about making them liable for back taxes.”

Justice Sonia Sotomayor at one point suggested that this was an issue that should be decided by the US Congress, not the Supreme Court, but Chief Justice John G. Roberts Jr. said there was no mechanism for the Court to tell the Congress to do so.

However, “both he and Justice Elena Kagan said the fact that Congress has so far chosen not to act was itself a telling indication that it was satisfied with the current system.

“The chief justice added that the marketplace may already be addressing the problem. ‘The bigger e-commerce companies find themselves with a physical presence in all 50 states,’ he said, ‘so they’re already covered’.”
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