The Supreme Court today ruled in favor of allowing states to require internet retailers to collect state and local sales taxes for online purchases and send those taxes to the state where the shopper lives. The 5-4 decision overturned an earlier Supreme Court ruling prohibiting states from imposing such requirements. Some states may be looking at the sales tax windfall as a revenue source to pay for transportation infrastructure improvements necessary to deliver the goods purchased on-line. Currently, online retailers need to collect those taxes only if they have a physical presence in the state.
In 2013, Virginia passed transportation funding legislation which included a provision directing that a large portion of proceeds from a tax on internet sales would be used to help pay for transportation projects. At that time a legislative committee estimated that the sales tax would generate annually nearly $170 million. Other states have considered similar measures and may now be incentivized to take up legislation. Chapters may want to ensure that any sales tax revenue from internet sales in their states are directed to infrastructure investment.
For more information, contact Brian Deery at [email protected] or (703) 837-5319.