In June of this year The U.S. Supreme Court ruled in favor of South Dakota.
Justice Anthony Kennedy, of the majority stated that, “The expansion of e-commerce has...increased the revenue shortfall faced by States seeking to collect their sales and use taxes, leading the South Dakota Legislature to declare an emergency.” He also implied that the long held rule, which denied state governments from enforcing compliance of their tax codes to businesses outside of their political jurisdiction, is outdated, claiming that it "undermines confidence" and gives "online retailers an arbitrary advantage"
So how will this tax actually affect the online economy that we have grown to love? And more importantly, Why is this ruling legally significant - and not just a matter of leveling the sales tax playing field?
President Donald Trump declared the ruling a “Great victory for consumers and retailers”. But following his tweet came a wave of comments - from these same presumed "victors"- expressing the exact opposite view. Their cries were echoed by the Finance Committee Chairman, Sen. Max Baucus as he expressed concern that as other states follow South Carolina's lead, compliance to the "thousands of different tax codes, in 7,500 different jurisdictions" will devastate retailers who do online business out of state. It should be noted that Sen Baucus represents a neighboring state to South Dakota, Montana, which imposes NO sales tax burden upon their citizens.
Josh Silverman, CEO of Etsy - an online company that assists thousands of home-based businesses in selling their handcrafted wares online, speculates that most of these small- business-of-one will not survive if they are required to figure out the tax due on every sale.” He also mentions that these businesses "have very different needs and challenges than larger online retailers”
...And speaking of larger online retailers, CNBC declared Amazon.com the winner of the supreme court ruling, pointing out that while smaller online retailers drown in logistical tax code hell, Amazon will have little issue complying with, or avoiding the new laws, and amass even more of the online sales market.
But there's another matter that should be even more alarming - to everyone.
When a state government is unrestrained, and even assisted, in imposing it's laws on a citizen outside of its democratic jurisdiction, modern political theory is turned on its head. What ever happened to "No Taxation without representation" and "Governments derive their just Powers from the Consent of the Governed"?
After all, the burden of collecting taxes should be on those public officials who are accountable to the people who elect them. Otherwise what incentive would any state legislature have in checking its expanding appetite for more power and taxes, if not for the voting constituents that might live under their potential tyranny?
And if their political reach is enabled to go beyond their borders and into areas without the check of a voting public, then not even Montana is safe to run to.
Contrary to the president's hope, this is bad for the economy - Higher prices for consumers, and less competition from folk who no longer have the opportunity to compete in national markets.
Not only will Big Online retailers continue to grow unchallenged, big government will continue to grow unchallenged as this ruling fundamentally alters some of the founding principles of the American republic.