Supreme Court Rules States – Can Collect Online Sales Tax
October 1, 2018 | View PDF
The State of Alabama’s fiscal year begins next week on October 1. Our state’s finances are not the best in the world. However, they got a boost from the U.S. Supreme Court earlier this year, The high tribunal ruled that states can collect sales tax on internet sales.
This was one of the most inequitable scenarios I have ever seen. If you went to the corner hardware store or Lowe’s or Walmart to buy a hammer and paint, you paid sales tax. However, if you bought these same items online you did not. That is not fair to the store or the state. What is even more unfair is if your wife went down to the local dress shop and tried on an expensive dress she liked and then came home and bought it online. How fair is that to the store, the clerk at the store or the state.
Finally, and thankfully, the Supreme Court clarified this inequality that had persisted for decades, since the inception of the internet.
Alabama had already gotten ahead of the curve in regards to collecting online sales tax. Through the wise stewardship of House Ways and Means Chairman, Steve Clouse, R-Ozark, we had joined 19 other states in passing legislation that companies were to voluntarily pay the online sales tax.
The legislation passed in 2015 was entitled the Simplified Sellers Use Tax. It allowed companies the permission to collect sales tax to be remitted to the state voluntarily in exchange for locking in a fixed rate of 8 percent no matter where in the state an online item was sold. As you know, the sales tax rate deviates throughout each city and locale. In Alabama’s case, the money collected under our SSUT Act was divided 50/50 between the state and cities and counties. The city’s and county’s half is disbursed based on population. The state’s half is divided 75 percent to the General Fund and 25 percent to the Education Fund.
Chairman Clouse estimates that the state will reap an additional $18-20 million from the Supreme Court decision. The Supreme Court’s 5-to-4 ruling overruled decades of old decisions that had cost the state billions of dollars over the years.
The cases the Court overturned said that if a business was shipping an online customer’s purchase to a state where the business did not have a physical presence like a store, warehouse, or office, the business did not have to collect sales tax and remit to the state. Over the decades this has been referred to as the Physical Presence Rule.
Retiring Justice, Anthony Kennedy, wrote the majority opinion. He said, “Every year the Physical Presence Rule becomes further removed from economic reality and results in significant revenue losses to the state.” Retail trade groups praised the ruling saying that it levels the playing field for local and online businesses. President Trump praised the decision via Twitter. The President hailed the Supreme Court opinion as a “Big victory for fairness and for our country.”
Speaking of President Trump and the Supreme Court, it is said and it is very true that the greatest legacy a U.S. President can record is an appointment to the U.S. Supreme Court. Trump has had two in the first two years. Regardless of what transpires in the next two years of Trump’s reign, from conservative Americans viewpoint, this presidency has been a success.
The nominations of Neil Gorsuch last year and Brett Kavanaugh this year were BIG. Both men are in their early 50’s and will make a powerful impact on public policy and law in America for decades. Long after Trump is gone, his legacy as a stalwart, conservative President will live on through Kavanaugh and Gorsuch.
Both are also men of character with impeccable credentials. They are strict Constitutional constructionists and adherents. Their intellectual prowess will be indelibly inscribed into the Law of the Land for generations.
As former President Barack Obama said, the night that Hillary Clinton lost to Donald Trump, “Elections have consequences.”