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"The Quill Court did not have before it the present realities of the interstate marketplace, where the Internet's prevalence and power have changed the dynamics of the national economy", Justice Anthony Kennedy wrote in the ruling.

Two popular companies named in the Supreme Court decision - home-goods retailer Overstock.com and electronics merchant Newegg.com - now collect no NY sales tax because they have no physical offices here.

Many large online retailers, including Walmart, Target and Apple, already collect state taxes.

The Supreme Court's ruling was praised by a number of retail groups, organizations representing state and local governments, right-leaning think tanks such as the Tax Foundation and American Enterprise Institute, and a bipartisan group of lawmakers. The share of overall retail purchases online has been steadily rising nearly a percentage point every year since 2010 - maybe this shift will actually help the "buy local" movement balance out the online boom. As a result, states argued they would lose millions in sales tax each year.

As an example, lawyers for the online retailers told the high court that in IL, a Snickers bar costs more in taxes than a Twix bar, since food items containing flour are not treated as candy for tax purposes. North Dakota, which established the physical presence test for sales and use tax nexus.

This overturned two Supreme Court rulings: 1967's National Bellas Hess, Inc. v. Department of Revenue of IL and 1991's Quill Corporation v. Hufstetler said that gives businesses in other states and countries an immediate pricing advantage when vying for Georgia customers. In upholding the ruling the Supreme Court overturned a 1992 ruling that required a "physical presence" in a state in order to mandate collection of sales tax.


"This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store, or both", Matthew Shay, federation president and CEO, said in a statement.

Today's ruling by the Supreme Court has many consumers wondering: Am I going to start paying more in taxes to shop online? Amazon already taxes items from its own warehouses. Five states don't charge sales tax.

A 2011 report issued by the Indiana Fiscal Policy Institute found the state is likely losing about $77 million in sales taxes on these e-commerce transactions each year. Other retailers-including Etsy, eBay, and Wayfair-are also seeing huge stock dips. Chief Justice John Roberts joined Stephen Breyer, Sonia Sotomayor and Elena Kagan in the dissent. Now governments will be able to collect billions of dollars in local sales tax.

"We are a state, we're most famous for having one of the most complicated and quite frankly, screwed up sales tax systems in the United States", McCarthy said.

The Illinois provision mirrors the South Dakota law at the center of the Supreme Court case, and is scheduled to go into effect on October 1.

"This is a great day for South Dakota".


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