This week, the Supreme Court is set to rule on a case that could end a precedent that allows online retailers to avoid collecting sales tax.

On Tuesday, the justices will hear arguments in South Dakora v. Wayfair Inc. (W), in which the state of South Dakota is seeking to overturn the 1992 decision in Quill v. North Dakota that says retailers need only collect sales tax within states that they have a physical presence. (See also: Amazon Rivals Protest Pentagon’s Giant Cloud Deal.)

Brick-and-mortar retailers insist that requiring online retailers to collect sales tax everywhere will provide a level playing field in an environment where online competitors, led by tech titan Inc (AMZN), have quicky risen to dominance. As for state and local governments, a change in the law could mean billions of dollars in new tax revenue. 

Forcing Smaller Vendors to Pay Up 

Amazon collects sales tax on its own products, but not on other business' products that are sold through its massive online platform. Walmart Inc. (WMT), the world's largest retailer, also collects sales tax on all of its sales in the 45 states that have a statewide sales tax in place. 

Many small retailers using Walmart and Amazon as their platform do not collect sales tax unless they have a physical presence in the state where the buyer lives. Amazon indicates that half of its sales are by small and medium-size retailers. 

Meanwhile, President Donald Trump continues to make public claims that Seattle-based retail behemoth Amazon collects “little to no taxes” to give to state and local governments, despite evidence contradicting his remarks. The Trump administration will join the oral argument in favor of overturning the 26-year-old court decision. Those on the opposing side indicate that the rule would impose a burden on small retailers who would ultimately owe local sales tax in addition to new state sales tax. Wayfair argues that more than 16,000 different taxing units could demand sales tax collections, according to CNN, while many jurisdictions could demand years of back sales taxes. 

Small retailers, who have used online platforms as a means to hedge against the rising popularity of global giants Amazon and Walmart, could see their position again hurt by the complexities of collecting and remitting sales tax nationwide. Some experts see this burden as pressuring mom and pop shops to close down their online businesses altogether. (See also: Amazon’s $1B 'LoTR': Most Expensive TV Show Ever.)

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