Attorney General Becerra: We Urge U.S. Supreme Court to Require Out-Of-State and Online Retailers to Pay State Sales and Use Taxes

SACRAMENTO – California Attorney General Xavier Becerra joined a bipartisan coalition of 44 Attorneys General in filing an amicus brief to urge the U.S. Supreme Court to reject its “physical presence” rule, which restricts states’ ability to collect certain taxes from out-of-state retailers. In 1967, the U.S. Supreme Court ruled in National Bellas Hess v. Department of Revenue that states were prohibited from requiring out-of-state retailers to collect sales and use taxes on goods purchased through the mail. With the rise of online shopping, out-of-state retailers – including online retailers – have used the physical presence rule to avoid collecting sales and use taxes.

“There is just no reason in our modern economy why out-of-state and online retailers should enjoy an exception that our local businesses do not,” said Attorney General Becerra. “That is why we are urging the U.S. Supreme Court to reject its outdated ‘physical presence’ rule. California proudly boasts the sixth largest economy in the world, and in order to continue thriving, we want to ensure that all those who do business in our state play by the same rules.”

South Dakota recently enacted a statute requiring online retailers to collect South Dakota sales taxes. On September 14, 2017, the South Dakota Supreme Court ruled that South Dakota's statute was unconstitutional. South Dakota filed a petition for writ of certiorari asking the U.S. Supreme Court to revisit the matter, and Attorney General Becerra joined a bipartisan coalition supporting South Dakota. On November 3, 2017, the U.S. Supreme Court granted review.

Attorney General Becerra filed this brief along with the Attorneys General of Colorado, Alabama, Arizona, Arkansas, Connecticut, the District of Columbia, Florida, Georgia, Hawai’i, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, Tennessee, Texas, Utah, Vermont, Virginia, Virgin Islands, Washington, Wisconsin, and Wyoming.

A copy of the brief is attached to the electronic version of this release at oag.ca.gov/news.