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NRF welcomes Supreme Court online retail tax ruling

US trade association the National Retail Federation (NRF) has welcomed a move by the US Supreme Court to overturn a decades-old tax ruling that has enabled many eCommerce players to avoid sales levies.

NRF president and CEO Matthew Shay said the decision – which many commentators have said gives online retailers an unfair advantage over their store-based competitors – “clears the way for a fair and level playing field” in the industry.

Previously, the ruling required organisations to collect sales tax from customers if their business had a physical presence in the state, which meant the likes of Amazon and – pertinent to this case, online furniture retailer Wayfair – could set up their business models to be more competitive on price.

In a close decision, five out of nine US Supreme Court justices sided with South Dakota state in its case against Wayfair, paving the way for other states to begin collecting taxes from online purchases.

The decision, announced on Thursday 21 June, overturned another state versus retailer ruling – the 1992 Quill vs. North Dakota case that instructed states could not collect sales tax from retailers who do not have a physical presence in their territory.

“Retailers have been waiting for this day for more than two decades,” explained Shay.

“The retail industry is changing, and the Supreme Court has acted correctly in recognising that it’s time for outdated sales tax policies to change as well. This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.”

NRF argued in a "friend-of-the-court brief" in 2017 that the court’s 1992 Quill decision was outdated and that sales tax collection is not the burden it might once have been due to changes in technology. In the brief, NRF said there is a wide variety of software available to automatically collect the sales tax owed, much of which is freely available or low cost.

Retail and Retail Property exper, Jonathan De Mello, on Twitter, commented: “[I've] been wondering when legislation to better level the playing field between physical and online retail would happen – this is a massive new development and it is very likely that the UK, Europe and other countries will follow the US's lead. It is a big boost for physical retail.”

Not all industry observers view the landmark legal case as a positive news for the wider retail industry.

Industry commentator, author and self-proclaimed retail prophet, Doug Stephens, used his Twitter account to say the decision “ironically, will make Amazon even more powerful and potentially kill smaller eCommerce players”.

He added that the online titan “has the necessary infrastructure to charge and remit sales tax across all the states, many of which have differing rates and regulations” but he suggested many small internet-based retailers do not.

“It effectively puts them out of business,” he warned.

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