The 5-4 decision defied the usual conservative-liberal lineup with Kennedy joined by liberal Justice Ruth Bader Ginsberg, and conservatives Samuel Alito, Neil Gorsuch and Clarence Thomas. North Dakota that restricts states from collecting sales tax from retailers without a physical presence in those states. This ruling could help clear away any legal objections to taxes like Chicago's Netflix tax.
The high court has said for more than 50 years in various rulings that states can not collect taxes from sellers without a "physical presence" in those states.
That's resulted in states losing millions of dollars in sales taxes every year and online retailers gaining a decades-long tax advantage against their brick-and-mortar peers.
In the digital era, the costs of complying with different tax regimes "are largely unrelated to whether a company happens to have a physical presence in a state", Kennedy wrote. That's because they typically have a physical store in whatever state the purchase is being shipped to.
A Government Accountability Office audit said states missed out on about $13.7 billion in tax revenue in 2017.
But sellers that only have a physical presence in a single state or a few states could avoid charging customers sales tax when they're shipping to addresses outside those states. Sellers who use eBay and Etsy, which provide platforms for smaller sellers, also aren't required to collect sales tax nationwide. Amazon already taxes items from its own warehouses.
That said, South Dakota's tax system includes several features that appear created to prevent discrimination against or undue burdens upon interstate commerce.
Three large retailers-Wayfair, Overstock and Newegg-do not, and South Dakota sued them for failing to collect taxes after the state's law went into effect.
Internet companies opposed to the South Dakota law appealed.