Supreme Court Levels Playing Field for Brick and Mortar Businesses, Decides in Favor of Fair and Equitable Tax System

By: Carolyn Johnson

Florida’s brick and mortar retailers have long been at a competitive disadvantage with the current tax system tilted in favor of online-only retailers. Today, the U.S. Supreme Court decided in favor of a fair and equitable tax system that discourages government from picking winners and losers through unfair tax policy.

The Supreme Court’s 5-4 decision in South Dakota v. Wayfair paves the way for states like Florida to collect sales tax from out-of-state retailers when residents make purchases. Prior to this decision, states were only able to tax sellers with a “physical presence” in the state, such as employees and/or real estate.

The South Dakota Legislature had passed a law that would require out-of-state sellers to collect and remit sales tax as if they had a physical presence for sellers that delivered more than $100,000 of goods or services in the state or had more than 200 separate transactions. Online retailers, such as Wayfair, challenged the South Dakota law. The U.S. Supreme Court over-turned two outdated court opinions from before the digital age and ruled in favor of the state of South Dakota under the Commerce Clause.

What Does This Mean?

Shortly after today’s ruling, Florida Chamber of Commerce President and CEO Mark Wilson reached out to Department of Revenue Executive Director Leon Biegalski.

The Florida Legislature can now pass laws to collect sales tax from out-of-state retailers that don’t have a “physical presence” in Florida. In order for the law to comply with the Wayfair decision, the business must engage in significant business in the state.

Closing this loophole does not create a new tax. Florida already requires individuals to report online sales taxes to the Florida Department of Revenue. The decision allows Florida to change current law to require online businesses to collect sales tax, rather than the consumer.