Today, the Supreme Court handed the states a victory in their battle to collect taxes on online sales, but, in doing so, dealt a heavy loss to the national market, small businesses, and the people at large. South Dakota v. Wayfair’s focus was on whether to overturn Quill Corp. v. North Dakota, which held that states could not impose tax collection obligations on businesses with no physical presence in the state. In a bizarrely split 5-4 decision–with Justice Kennedy writing the majority joined by Thomas, Ginsburg, Alito, and Gorsuch and Chief Justice Roberts writing the dissent joined by Breyer, Sotomayor, and Kagan–the Court held that states can charge sales taxes on completely out-of-state businesses.
As the dissent rightly points out, the majority decided Wayfair with “an inexplicable sense of urgency,” asserting that “the passage of time is only increasing the need to take the extraordinary step of overruling” longstanding precedent. While wrongly decided cases need to be dealt with, Quill was not one of those decisions. As the chief justice correctly observes in his dissent: “E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule. Any alteration to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress.” In fact, amicus briefs for various senators and members of Congress were submitted to the Court highlighting the ongoing efforts to fix the e-commerce sales-tax system, and three bills are currently pending. “By suddenly changing the ground rules,” the chief justice warns, “the Court may have waylaid Congress’s consideration of the issue. Armed with today’s decision, state officials can be expected to redirect their attention from working with Congress on a national solution, to securing new tax revenue from remote retailers.”