Right now, under a decades-old Supreme Court rule, if a business is shipping a product to a state where it doesn't have an office, warehouse or other physical presence, it doesn't have to collect the state's sales tax. Customers are generally supposed to pay the tax to the state themselves, but the vast majority don't.
"There are hundreds of companies that have not signed on." said Rep. Steve Clouse, R-Ozark. Many of these vendors likely only have physical operations in one state, and rely on marketplaces like Amazon and eBay for cross-border sales and logistics, previously shielding them from a lot of states' sales taxes.
Congress weighed in on the issue previous year, as a bipartisan group of senators introduced the Marketplace Fairness Act, legislation that would require all businesses selling online to collect sales tax for the state where the consumer making the purchase resides.
The justices heard arguments in a case that deals with businesses' collection of sales tax on online purchases.
Retailers, however, argue that the issue should be decided by Congress and not the courts.
The president's recent attention to the tactics used by major online retailers comes as no surprise to those who understand the advantage that an antiquated legal loophole gives online-only sellers over their Main Street competitors.
Q: What are examples of online retailers that don't collect sales tax nationwide?
Early indications show numerous judges seem against changing precedent and that it should be congress, not the courts, to change the law.
"The very objective of the Commerce Clause was to ensure a national economy free from such unjustifiable local entanglements", they wrote in court documents. Obviously the states involved are keen to get their hands on what could be many billions of dollars of revenue. Following Quill, South Dakota courts concluded that the new law violates the commerce clause. The time has come for the U.S. Supreme Court to do just that.
Isaacson argued before the Court that South Dakota's law would put too much burden on small- to mid-sized businesses and that it's too daunting and expensive for those merchants to keep up with thousands of different rules going state to state. The law requires out-of-state sellers who do more than $100,000 of business in the state or more than 200 transactions annually with state residents to collect and turn over sales tax to the state.