COLUMBUS—The U.S. Supreme Court today issued its decision in the South Dakota v. Wayfair, Inc. case pertaining to states’ ability to collect sales tax from online retailers that do not have a brick and mortar, or physical presence, within the state. In a 5-4 ruling in favor of South Dakota, today’s decision sets a precedent to allow states to collect sales tax from all online purchases.
The ruling reverses a 1992 decision, Quill Corp. v. North Dakota, which said states do not have the ability to collect sales tax on retailers without a physical presence in the state. Since that ruling, and with the growth of internet sales, some retailers have begun voluntarily collecting and remitting sales tax to states.
In the biennial budget passed in 2017, Ohio lawmakers established a means for the Ohio Department of Taxation (ODT) to collect sales tax from online vendors whose sales in Ohio exceeded certain thresholds, however the ODT has yet to implement the system which has many similarities to the South Dakota law.
Ohio is also one of 24 states that is a member of the Streamlined Sales Tax Governing Board (SSTGB), an organization striving to establish a uniform process for states to collect sales tax from remote online sellers. Through the agreement as a member of the SSTGB, Ohio would not begin collecting sales tax retroactively based on this decision.
State Representative Gary Scherer (R-Circleville), the vice chair of the House Ways and Means Committee and member of the Executive Committee for the SSTGB, has worked on this issue throughout his tenure in the legislature. Scherer released the following statement on the Wayfair decision:
“This decision is a win for both Ohio-based businesses as well as Ohio consumers. Ohio businesses can now be put on a level playing field with major online retailers, who up until now, have been able to skirt their responsibility to collect and remit sales tax to the state of Ohio. This ultimately left the burden of remitting sales tax for online purchases to Ohioans who are expected to declare online purchases on their annual income tax return for the sales tax to be calculated. Because consumers were already expected to be paying this tax, today’s decision in no way results in a new tax or a tax increase, but rather gives Ohioans the ability to more easily comply with the law.
“Given the Wayfair decision, I believe it is crucial for Congress to now pass the Remote Transaction Parity Act, which would create a streamlined and uniform process nationwide for online retailers. We must have a harmonious system for businesses, consumers and states to easily comply with the new standard established by today’s decision. Congress has the ability to create a consistent collection system by passing the RTPA.”