By a 5-4 vote, the U.S. Supreme Court ruled that states are allowed to collect sales taxes from online retailers even if the businesses do not have a physical, brick-and-mortar location in the state. Thursday’s ruling overturns the 1992 Quill v. North Dakota decision; tightening the sales tax requirements for online businesses.

Previously, if a business did not have a physical presence in the state, they were not required to collect a sales tax. For Washington State, which depends heavily on sales tax revenue, the previous ruling came at the expense of brick-and-mortar businesses which are required to collect the state sales tax, making their goods more expensive than out-of-state online retailers.

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In 2017, as part of their budget deal, Washington lawmakers passed legislation giving out-of-state retailers the option to either collect state sales tax, or inform buyers on how they can pay the tax to the state. Businesses who opt to inform consumers would need to file a report with the Department of Revenue annually to verify that the correct amount of sales tax is collected. Washington’s expansion of online sales tax collection was modeled after a similar law in Colorado that was stuck in litigation for years. Following passage of their 2017 budget deal, the Washington Legislature faced similar threats of legal action.

Senator Christine Rolfes, Chair of the Senate Ways and Means Committee, says that Thursday’s decision affirms their work in 2017 and will likely result in new legislation in 2019 to “modernize” sales tax collection.

“This affirms the bipartisan decision the Legislature made in 2017 and will help level the playing field for our small brick and mortar stores across the state as they face increasing competition with large, out-of-state retailers,” said Rolfes.

“As we plan for the 2019 legislative session, we now have an opportunity to further modernize our sales tax collections. Our state was ahead of the curve and, as a result, the effect of this ruling will likely be minimal on Washington consumers, but will undoubtedly be a net positive for state and local government revenue collections.

“I’m glad our state is a step ahead and Washington consumers aren’t likely to see drastic changes. For example, Washington residents are already paying sales tax on Amazon purchases.

“As we learn more about the impact of the ruling, it is likely that follow-up legislation will be necessary in 2019.”

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