One of the biggest subsidies was the fact that Amazon did not have to collect state sales taxes, based on a a 1992 Supreme Court ruling.
The Supreme Court has now reversed this ruling, meaning that online vendors will have to collect state sales taxes:
Justice Anthony Kennedy had essentially invited a test case to overrule Quill Corp. v. North Dakota and its physical-nexus rule for the states being able to require out-of-state retailers to collect sales tax. So it was not a huge surprise that Kennedy had the opinion for the court today in South Dakota v. Wayfair.It would have been nice if this had happened a decade ago, before various internet retailers became behemouths.
Except, of course, that the oral argument in the case in April had left many observers wondering whether the court could get to a majority willing to overrule the 1992 Quill decision and its 1967 predecessor, National Bellas Hess Inc. v. Illinois Department of Revenue.
“In effect, Quill has come to serve as a judicially created tax shelter for businesses that decide to limit their physical presence and still sell their goods and services to a state’s consumers—something that has become easier and more prevalent as technology has advanced,” Kennedy wrote. “This Court should not prevent states from collecting lawful taxes through a physical presence rule that can be satisfied only if there is an employee or a building in the state.”
In an unusual voting lineup, the court did reach such a majority, and Kennedy announced that the physical-presence rule was unsound and incorrect, and that Quill and Bellas Hess were overruled.