Texas Redistricting Case Added to Supreme Court Docket

Traders wait for the Wayfair IPO on the floor of the New York Stock Exchange

Traders wait for the Wayfair IPO on the floor of the New York Stock Exchange Thomson Reuters

The Supreme Court on Friday added a third examination of discriminatory gerrymandering charges to its docket, this time from Texas, and announced it will consider overruling a decades-old precedent that hobbles states from requiring online retailers to collect sales tax.

Attorney General Ken Paxton appealed to the U.S. Supreme Court, which granted a temporary suspension of the lower court rulings.

When Sen. Heidi Heitkamp, D-N.D., got the news that the U.S. Supreme Court would be taking up a case on state's rights to collect sales tax on online sales, she just started smiling. A "use" is supposedly imposed directly on a consumer who buys from a seller that has no duty to collect a sales tax; some out-of-state retailers do agree to collect such a tax from South Dakota buyers, but that can't be enforced so it is not done universally.

Critics of the 1992 decision say it no longer fits a world where much of our commerce happens, at least in part, online.

States and counties told the court they lose between $13 billion and $34 billion each year because they can not collect sales taxes on all online purchases.

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Skepticism of Quill grew with internet sales, even among members of the Court. "Unfortunately, antiquated sales tax collection rules have resulted in an uneven playing field that's making it harder for Main Street retailers to compete in today's digital economy", said Matthew Shay, president of the National Retail Federation trade group.

The court probably will hear arguments in April and decide the case by late June.

That would be a victory for states and traditional businesses, but a defeat for smaller online retailers who claim they can not navigate dozens of state sales tax systems the way major players such as Amazon do.

The petition "invites the court to assume a legislative role, supplanting Congress, the body to which the Constitution assigns responsibility for regulating commerce 'among the several states, ' and which is actively addressing the issue", the companies said.

South Dakota is losing millions of dollars a year in uncollected sales taxes because of growing Internet sales.

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"Sales tax collection has become more complex as the number of tax jurisdictions has more than doubled since 1992", they argued in court papers. Earlier this month, South Dakota's lone congresswoman, Republican Kristi Noem, told media that President Donald Trump had promised he would sign a bill requiring online merchants to collect sales tax.

State courts predictably struck down the law, citing the Supreme Court's precedent.

South Dakota has no state income tax and relies heavily on sales taxes to fill state coffers.

Part of the law created to assure a court test of the state's new tax gave the state permission to sue out-of-state retailers who failed to collect and pay.

The National Retail Federation, which represents both internet and brick-and-mortar sellers, said Friday it welcomed the Supreme Court's decision to take the case.

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Sales taxes are a crucial source of revenue in the 45 states that collect them.

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